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V 



' 



: 



94th Congress \ 
2d Session J 






COMMITTEE PRINT 



FEDERAL LEASING OF PETROLEUM ON THE 
OUTER CONTINENTAL SHELF 



PREPARED BY THE 

CONGRESSIONAL RESEARCH SERVICE 
LIBRARY OF CONGRESS 

AT THE REQUEST OP 

Henry M. Jackson, Chairman 
COMMITTEE ON INTERIOR AND 
INSULAR AFFAIRS 
UNITED STATES SENJCW''''- 




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197P £3 I 






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JANUARY 1976 



63-732 



U.S. GOVERNMENT PRINTING OFFICE 
WASHINGTON : 1976 



COMMITTEE ON INTERIOR AND INSULAR AFFAIRS 

HENRY M. JACKSON, Washington, Chairman 

F RANK CHURCH, Idaho PAUL J. FANNIN, Arizona 

LEE METCALF, Montana CLIFFORD P. HANSEN, Wyoming 

J. BENNETT JOHNSTON, Louisiana MARK O. HATFIELD, Oregon 

JAMES ABOUREZK, South Dakota JAMES A. McCLURE, Idaho 

FLOYD K. HASKELL, Colorado DEWEY F. BARTLETT, Oklahoma 

JOHN GLENN, Ohio 
RICHARD STONE, Florida 
DALE BUMPERS, Arkansas 

Grenville Garside, Special Counsel and Staff Director 

Daniel A. Dreyfus, Deputy Staff Director for Legislation 

William J. Van Ness, Chief Counsel 

D. Michael Harvey, Deputy Chief Counsel 

Owen J. Malone, Senior Counsel 

Harrison Loesch, Minority Counsel 

(H) 



MEMORANDUM OF THE CHAIRMAN 

To Members of the Senate Committee on Interior and Insular Affairs: 

On July 30, 1975, the Senate passed the Outer Continental Shelf 
Management Act of 1975 (S. 521). It makes many much needed 
changes in the Outer Continental Shelf Lands Act of 1953. The major 
changes would: (1) establish policy guidelines, (2) require a 5-year 
leasing program, (3) give the coastal States an increased role in 
Federal OCS decisions, (4) provide Federal compensation to coastal 
States adversely affected by OCS development, (5) improve safety 
requirements, (6) establish unlimited absolute liability for oil spill 
damage with payments from a liability fund, (7) provide for a two- 
step decision process to separate exploration from development and 
production, and (8) authorize new leasing systems and require their 
use on an experimental basis. 

This study, by the Library of Congress, focuses on the issues pre- 
sented by the various new leasing systems which have been included 
in S. 521 or have been proposed elsewhere. I believe that it will be 
helpful to the Committee as we continue our work on this vital 
legislation. 

Henry M. Jackson, Chairman. 
(in) 



Digitized by the Internet Archive 
in 2013 



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CONTENTS 



Page 

Memorandum of the Chairman in 

I. Introduction 3 

II. History of OCS leasing 5 

III. Current procedure 15 

Background 15 

Proposed schedule — Provisional OCS leasing 20 

Call for nominations 21 

Tract selection 21 

Environmental analyses 22 

Program decision option document 23 

Presale evaluations 23 

Sale 24 

Postsale analysis 24 

Competition 26 

Disadvantages of current system 31 

IV. Alternative leasing methods 33 

General considerations 33 

Fixed royalty with bonus bidding 35 

Fixed bonus with royalty bidding 36 

Fixed bonus with rental bidding 36 

Fixed bonus with profit-share bidding 37 

Declining royalty schedule 38 

Performance system 38 

Fixed bonus with oil payment bidding 38 

Staggered bonus bidding 39 

Share bidding 39 

Summary of alternative leasing methods 39 

V. Alternatives to leasing 43 

VI. Conclusion 45 

APPENDIX 

Offshore oil: Selected references 1969-75 49 

(V) 



FEDERAL LEASING OF PETROLEUM ON THE 
OUTER CONTINENTAL SHELF 



Prepared by 

David M. Lindahl 
Analyst in Energy Policy 

and 

Howard Useem 

Analyst in Economic Policy 

Congressional Research Service 

Library of Congress 

at the request of 

Henry M. Jackson, Chairman 

Committee on Interior and Insular Affairs 

United States Senate 



(l) 



FEDERAL LEASING OF PETROLEUM ON THE OUTER 
CONTINENTAL SHELF 

I. Introduction 

In the 22 years that have elapsed since the first Federal lease of 
petroleum on the Outer Continental Shelf (OCS) was granted in 1954, 
this source of oil and gas has risen to a position of major importance in 
domestic energy production. It is likely that this trend will continue 
as onshore production declines and the demand for accelerated leasing 
of the OCS increases. Because of its importance, OCS leasing policy 
has become the subject of intense controversy in recent years. In- 
volved in the leasing decisions are a wide range of issues which are 
beyond the scope of this report. These considerations include political 
and environmental factors that can figure significantly in the basic 
policy decision to lease or not to lease. The controversy does not end 
there, however, for the allocation of the leases remains as a difficult 
and complex problem. It is toward that aspect of leasing that this 
report is addressed. 

The current leasing system reflects an earlier period when the United 
States was relatively independent of foreign oil and when the major 
leasing consideration was in maximizing the revenues to the Federal 
Government, regardless of the value of the resource to society. Under 
this system, which has not changed significantly since its inception, 
the resources are allocated on the basis of a single variable — the 
initial cash bonus. Within this framework, the present leasing system 
has proven to be both workable and effective. 

In recent years, however, Federal OCS leasing policy has been 
seriously questioned. There has been considerable concern that to the 
Nation's detriment this policy may not be encouraging the maximum 
production of the resource, may not be distributing the leases in the 
most equitable manner, and may be limiting the financial ability of 
the operators to develop the leases. The advantages and disadvantages 
of alternative leasing arrangements, therefore, need to be considered 
in any attempt to correct the shortcomings of the present system. 

This paper is intended to provide not a comprehensive analysis of 
all aspects of Federal leasing policy but a perspective on the subject of 
lease allocation. To deal effectively with the issue, it is necessary to 
understand both the evolution of the current policy and the alter- 
natives that have been proposed for the future. There can be little 
doubt that the current system has deficiencies, but there is always the 
possibility that uninformed policy decisions might inadvertently 
produce something worse. The following description of the system, 
analysis of its strengths and weaknesses, and assessment of proposed 
alternatives may provide a useful context for future congressional 
deliberations on this issue. 

(3) 



63-732 O - 76 - 2 



II. History of OCS Leasing 

Geographically, the continental margin extends from the mean 
low-water line to the deep seabed and consists of three parts. Extend- 
ing seaward they are (1) the continental shelf, (2) the continental 
slope, and (3) the continental rise. The continental shelf is that portion 
of the continental margin that lies between the mean low-water line 
and is the change in the inclination of the ocean floor that marks the 
beginning of the continental slope (see fig. 1). The Outer Continental 
Shelf (OCS), the area of concern here, is the portion of the continental 
shelf that is under the jurisdiction of the Federal Government. 




Figure 1. — Programmatic Profile of Continental Margin 

Numbers shown (metres and kilometres) are world-wide averages. The world's 

continental terrace, which includes the continental shelf and the continental 

slope, covers an area of about 21,400,000 square miles. The 1,332,000 square 

miles adjacent to the United States amounts to 6.22 percent of the world total. 

Source: Department of the Interior. 

By legislation and subsequent Supreme Court decisions the shore- 
ward boundary of the OCS is fixed at 3 nautical miles (3.5 statute 
miles) from shore, except along Texas and the Gulf Coast of Florida 
where, due to historical precedent, it is fixed at three leagues (10.5 

(5) 



6 

statute miles). 1 Article I of the 1958 Geneva Convention on the 
Continental Shelf attempted to establish the seaward limit of the 
Outer Continental Shelf. It defined the Outer Continental Shelf 
to refer : 

(a) to the seabed and submarine areas adjacent to the coast but 
outside the area of the territorial sea to a depth of 200 meters, 
or, beyond that limit, to where the depth of the superjacent 
waters admits of the exploitation of the natural resources of 
the said areas; and 

(b) to the seabed and subsoil of similar submarine areas ad- 
jacent to the coasts of islands. 

Between the shoreward boundary and the 200-meter depth contour 
line, 560,000 square statute miles of OCS lie off the coast of Alaska, 
107,500 off the Gulf Coast, 122,000 off the Atlantic Coast and 15,400 
off the combined coasts of Washington, Oregon, and California. 2 

The OCS of the United States consists of about 805,000 square miles 
or 515 million acres, of which only about 3 percent is presently under 
lease. Although there are significant recoverable petroleum reserves off 
the Alaska and California coasts, throughout the Gulf of Mexico and 
adjacent to much of the Eastern seaboard (see figs. 2-6), most of the 




Department ot the Interior 
Bureau ol Land Management 



1 U.S. Congress. Senate. Committee on Interior and Insular AtTairs. Outer Continental Sliolf Policy 
Issues. Hearings, 92d Congress, 2d session. March 23, 24, and April 11, 18, L972. Washington, U.S. Govern- 
ment Printing Office, 1972. p. 173. 

I Ibid, p. 174. 



8 



Figure 4 



OUTER CONTINENTAL SHELF AREAS UNDER CONSIDERATION 
FOR LEASING 

WEST COAST RtGiON 
ICAK 

no ioo 400 - .. 



100 200 300 100 S00 600 I 

Department of the Interior 

v 




T>-.^ 



7--— - 



/ -. 



Figure 5 
OUTER CONTINENTAL SHELF AREAS UNDER CONSIDERATION 



FOR LEASING 





OUTER CONTINENTAL SHELF AREAS UNDER CONSIDERATION FOR LEASING 

GUIF OF MEXICO 8EGION 



current OCS petroleum production takes place off the Louisiana Coast. 
In 1975 the OCS provided 332 million (approximately 11 percent) of 
the 3. 1 billion barrels of oil that the United States produced. In 1975 
U.S. domestic production of natural gas was approximately 20.1 



10 



trillion cubic feet, of which the OCS contributed about 3.5 trillion cubic 
feet (approximately 17 percent). 

The U.S. Geological Survey (USGS) recently estimated that there 
are approximately 58 billion barrels of oil and natural gas liquids on 
the OCS that are recoverable at the present time (see fig. 7). This was 
a drastic downward revision from previous estimates. It should be 
noted that in many of these areas no drilling has yet taken place and 
that the data is preliminary at best. 

FIGURE 7 

PRODUCTION, RESERVES, AND UNDISCOVERED RECOVERABLE OFFSHORE RESOURCES FOR THE UNITED STATES, 

DEC. 31, 1974 





Cumula- 
tive pro- 
duction 


Demonstrated 
reserves 


Total 

cumulative 
production 
plus dem- 
onstrated 
reserves 


Inferred 
re- 
serves i 


Undiscovered recoverable 
resources 




Statis- 
tical 
mean 


Estimated 
range' 


Regions 


Meas- 
ured 


Indi- 
cated 


95 per- 5 per- 
cent cen 


Crude oil (billions of barrels): 
1A. Alaska 


0.456 


0.150 


( 3 ) 


0.606 


<0.1 


15 


3 31 


2A. Pacific Coastal States.. 

Gulf of Mexico 

Atlantic Coastal States. 


1.499 
4.135 
0.000 


0.858 
2.212 
0.000 


0.258 
0.050 
0.000 


2.616 
6.397 
0.000 


0.2 
2.4 
0.0 


3 
5 
3 


2 5 

3 8 
*2 4 


Total lower 48 off- 
shore 


5.634 


3.070 


0.308 


9.012 


2.6 


11 


5 18 


Total offshore United 
States 


6.090 


3.220 


0.308 


9.618 


2.7 


26 


10 49 


Natural gas (trillions of cubic 
feet): 
1A. Alaska 


0.423 


0.145 ... 




0.568 


•0.1 


44 


8 80 


2A. Pacific Coastal States.. 


1.415 

32. 138 

0.000 


0.463 ... 




1.878 
67. 486 
0.000 


0.4 

67.0 

0.0 


3 
50 
10 


2 6 


Gulf of Mexico 

Atlantic Coastal States. 


35.348 ... 
0.000 


"o'm 


18 91 
?5 14 


Total lower 48 off- 
shore 


33. 553 


35.811 ... 




69. 364 


67.4 


63 


26 114 










Total offshore United 
States 


33.976 


35.956 .. 




69.932 


67.5 


107 


42 181 










Natural gas liquids (billions of 
barrels): 
1A. Alaska 












1.1 


















2A. Pacific Coastal States. 












0.1 . 
1.3 

0.3 




Gulf of Mexico 














Atlantic Coastal States 




























Total lower 48 off- 
shore 












1.7 


















Total offshore United 
States 












2.8 



















1 Inferred reserves were derived for all regions based on historical data. 

2 The low value of the range is the quantity associated with a 95 percent probability (19 to 20 chance) that 
there is at least this amount. The high value is the quantity with a 5 percent probability (1 to 20 chance) 
that there is at least this amount. Totals for the low and high values are not obtained by arithmetic sum- 
mation; they are derived by statistical methods. 

3 Negligible— less than 0.001 billion barrels. 

* Inferred reserves based on national onshore average. 

5 Estimates reported at the 75 and 25 percent probability levels because, in this area, these levels are 
judged to be more applicable for some planning purposes. It can also be noted that in frontier areas, lacking 
discovered indigenous or adjacent recoverable hydrocarbons, uncertainty is sufficiently great as to weaken 
probability estimates at extreme ranges. For purposes of comparison with other recorded ranges, the 95-5 
percent probability range in offshore Atlantic is 0-6 billion barrels of oil. 

n Inferred reserves based on national onshore average. 

7 Estimates reported at the 75 and 25 percent probability levels because, in this area, these levels are 
judged to be more applicable for some planning purposes. It can also be noted that irt frontier areas, lacking 
discovered indigenous or adjacent recoverable hydrocarbons, uncertainty is sufficiently great as to weaken 
probability estimates at extreme ranges. For purposes of comparison with other recorded ranges, the 95-5 
percent probability range in offshore Atlantic is 0-22 trillion cubic feet of gas. 

Source: U.S. Geological Survey, "Geological Estimates of Undiscovered Recoverable Oil and Gas Resources 
in the United States," circular 725, Department of the Interior, 1975. 



11 

By compiling responses to a recent survey, the Department of the 
Interior has ranked the economic value and order of industry pref- 
erence of the various sections of the OCS. 3 In order of preference they 
were as follows: 1st — -the Central Gulf of Mexico, 2nd — The Gulf of 
Alaska, 3rd — the West Gulf of Mexico, 4th — -the Southern California 
borderland, 5th — -the Mid-Atlantic, 6th — the East Gulf of Mexico, 
7th— the North Atlantic, 8th— the Bristol Bay, 9th— the Beaufort 
Sea, 10th — Santa Barbara, 11th — the Cook Inlet, 12th — -the Bering 
Sea, 13th— the South Atlantic, 14th— the Chukchi Sea, 15th— the 
Southern Aleutian Shelf, 16th — Northern-Central California, and 
17th — Washington and Oregon. 

During the early 1940's coastal States began leasing offshore lands 
to the oil industry. Texas had passed an offshore leasing act in 1913, 
Louisiana in 1915, and California in 1921. A jurisdictional dispute soon 
arose between the States and the Federal Government over leasing 
authority for these areas and the extent of State and Federal control. 4 
The two Mineral Leasing Acts of 1920 and 1937 did not cover the issue 
and the States claimed the authority. A House Joint Resolution would 
have given these rights to the Federal Government, but the bill was 
vetoed by President Truman and the House did not have enough votes 
to override. The issue was forced when a suit was brought against the 
Pacific Western Oil Corporation by the Federal Government to 
recover submerged lands that had been leased by the State of Cali- 
fornia to the oil company. The question of submerged land owner- 
ship was settled when President Truman proclaimed on September 28, 
1945 that the continental shelf belonged to the United States. The 
Supreme Court, in decisions against California, Texas and Louisiana, 
upheld the proclamation in ruling that the States did not own the 
three-mile marginal belts along their coasts. 

The issue was not closed by those decisions, however, and clarifying 
legislation was sought in Congress. House Resolution 4198 was signed 
into law as the Submerged Lands Act on May 22, 1953. 5 This act gave 
the States title to the lands beneath navigable waters within their 
boundaries and permitted the coastal States to resume leasing. The 
boundary between State and Federal canals, therefore, was transferred 
from the "ordinary low-water mark and the seaward limits of inland 
waters" to "the seaward boundaries of the states." This was a mini- 
mum of three nautical miles (3.5 statute miles) for all States, although 
the act extended to each of the States bordering the Gulf of Mexico 
the opportunity to prove entitlement in judicial proceedings to a 
greater grant up to three marine leagues (approximately 10.5 statute 
miles) through proof that it had a boundary extending more than three 
nautical miles from its coast when it came into the Union, or if such 
an extended boundary had been approved by Congress prior to enact- 
ment of the Submerged Lands Act. 

After enactment of the Submerged Lands Act, each of the States 
bordering on the Gulf of Mexico claimed historic boundaries extending 
three leagues into the Gulf of Mexico from its coastline. The Federal 
Government reached an interim agreement with the State of Louisiana 

s U.S. Department of the Interior, Bureau of Land Management. Report On The Responses Received In 
Reply To The Request For Comments On Potential Future Outer Continental Shelf Oil And Qas Leasing. 
June 5, 1974: p. 9. 

4 Bass, D. M., ed., State and Federal Regulations Pertaining to the Petroleum Industry, Quarterly of 
Colorado School of Mines, v. 65, n. 3, July 1970, p. 2. 

5 Public Law 31, Submerged Lands Act (67 Stat. 29, U.S.C. 1301 et seq.). 



63-732 O - 76 - 5 



12 

under which mineral development in the contested area could proceed 
pending final determination of the controversy in the courts. Under the 
agreement, income from mineral leases in the disputed areas has been 
held in an escrow fund. 

In litigation involving all five Gulf States, the Supreme Court in 
1960 rendered decisions holding that under the Submerged Lands 
Act the States of Louisiana, Mis>i-sippi, and Alabama were entitled 
to juridical boundaries extending no more than three nautical miles 
from their coastline. The Court also concluded that the three-league 
boundary claimed by Texas when it entered the Union was entitled 
to recognition under the Submerged Lands Act. It also held that 
Florida's Gulf Coast boundary (but not its Atlantic Coast boundary) 
extends to three leagues because of Congressional approval of a 
boundary claimed in Florida's new constitution upon its readmission 
to the Union after the Civil War. These decisions, however, did not 
determine the location of the coastlines of the States involved. 

In 1965, the Supreme Court adopted the definitions expressed in 
the Geneva Convention on the Territorial Sea and Contiguous Zone 
for the purpose of determining the location of the coastline of the 
coastal States under the Submerged Lands Act. This resulted in a 
substantial settlement of certain areas in dispute between the Federal 
Government and the State of California, and led to a stipulated 
supplementary decree adjudicating the respective rights of the United 
States and the State of Louisiana to a small part of the contested 
area in the Gulf of Mexico. 

On March 3, 1969, the Supreme Court rendered another decision 
regarding the location of the Louisiana coastline. In this decision the 
Court rejected Louisiana's claim that the so-called "Coast Guard 
Line" was its "coastline" for the purposes of measuring its entitlement 
to submerged lands in the Gulf of Mexico under the Submerged Lands 
Act. Resolution of this issue in favor of the United States will ulti- 
mately entitle the Federal Government to most of the areas in dispute 
off the Louisiana Coast and to a large percentage of the lease revenues 
impounded under the 1956 Interim Agreement. The Court, however, 
referred the case to a Special Master for consideration of several 
other questions relating to the precise location of the coastline. 

The litigation concerning the coastline of Texas was resolved in 
1967 when the Court ruled that the 3-league belt of submerged lands 
in the Gulf of Mexico granted to Texas by the Submerged Lands Act 
was to be measured from its coastline as it existed in 1845 when 
Texas was admitted to the Union. 

Recently Borne of the States along the East Coast have claimed 
submerged lands as far as 80 miles into the Atlantic Ocean, basing 
their claims on colonial charter grants from the Knglish Crown. In 
April 1969, the United States filed an original action in the Supreme 
Court against each of the Atlantic Coast States to establish its right 
to the submerged areas of the Allan tic Ocean seaward of the three-mile 
line. On March 17, 1975 the U.S. Supreme Court, in U.S. vs Maine, 
et al, decided against the coastal States and continued to limit their 
jurisdiction to three miles. The International Boundaries between 
the United State- and Canada, The Bahamas, Cuba and Mexico (in 
the Pacific Ocean) are not yet firmly established. 



13 

To cover leasing on the Continental Shelf beyond the State jurisdic- 
tion, a new leasing law was needed because the existing laws did not 
apply. On August 7, 1953, the Outer Continental Shelf Lands Act 
was passed. 6 It was to be not only the equivalent of the Mineral 
Leasing Act for the OCS, but also the legislative authority to acquire 
the subsoil and seabed of the OCS beyond the limits of the States. It 
set for the Federal Government, therefore, exclusive jurisdiction and 
control over this vast area of the Outer Continental Shelf and pro- 
vided for the development of its mineral resources. The Outer Con- 
tinental Shelf Lands Act gave to the Secretary of the Interior the 
authority to carry out the provisions of the Act. This authority has 
since been delegated to the Bureau of Land Management for leasing 
and to the United States Geological Survey for regulation of lease 
exploration, drilling, and development. This established the frame- 
work for Outer Continental Shelf mineral leasing on the basis of 
the following provisions : 

Sec. 5(a)(1). The Secretary shall administer the provisions of this Act relating 
to the leasing of the Outer Continental Shelf, and shall prescribe such rules and 
regulations as may be necessary to carry out such provisions. The Secretary may 
at any time prescribe and amend such rules and regulations as he determines of 
waste and conservation of the natural resources of the Outer Continental Shelf, 
and the protection of correlative rights therein, and, notwithstanding any other 
provisions herein, such rules and regulations shall apply to all operations conducted 
under a lease issued or maintained under the provisions of this Act. In the en- 
forcement of conservation laws, rules, and regulations the Secretary is authorized 
to cooperate with the conservation agencies of the adjacent States. Without limit- 
ing the generality of the foregoing provisions of this section, the rules and regula- 
tions prescribed by the Secretary thereunder may provide for the assignment or 
relinquishment of leases, for the sale of royalty oil and gas accruing or reserved 
to the United States at not less than market value, and, in the interest of conserva- 
tion, for unitization, pooling, drilling agreements, suspension of operations or 
production, reduction of rentals or royalties, compensatory royalty agreements, 
subsurface storage of oil or gas in any said submerged lands, and drilling or other 
easements necessary for operations or production. 

Sec. 8. Leasing of Outer Continental Shelf. — (a) In order to meet the 
urgent need for further exploration and development of the oil and gas deposits 
of the submerged lands of the Outer Continental Shelf, the Secretary is authorized 
to grant to the highest responsible qualified bidder by competitive bidding under 
regulations promulgated in advance, oil and gas leases on submerged lands of 
the Outer Continental Shelf which are not covered by leases meeting the require- 
ments of subsection (a) of section 6 of this Act. The bidding shall be (1) by sealed 
bids, and (2) at the discretion of the Secretary, on the basis of a cash bonus with 
a royalty fixed by the Secretary at not less than 12^ 2 per centum in the amount or 
value of the production saved, removed or sold or on the basis of royalty, but at 
not less than the per centum above mentioned, with a cash bonus fixed by the 
Secretary 

(b) An oil and gas lease issued by the Secretary pursuant to this section shan 
(1) cover a compact area not exceeding five thousand seven hundred and sixty 
acres, as the Secretary may determine, (2) be for a period of five years and as 
long thereafter as oil or gas may be produced from the area in paying quantities, 
or drilling or well reworking operations as approved by the Secretary are conducted 
thereon, (3) require the payment of a royalty of not less than 12^ per centum, 
on the amount of the production saved, removed, or sold from the lease, and (4) 
contain such rental provisions and such other terms and provisions as the Secretary 
may prescribe at the time of offering the area for lease. 

Sec. 9. Disposition of Revenues. — All rentals, royalties, and other sums 
paid to the Secretary or the Secretary of the Navy under any lease on the Outer 
Continental Shelf for the period from June 5, 1950, to date, and thereafter shall 
be deposited in the Treasury of the United States and credited to miscellaneous 
receipts. 



« Public Law 212, Outer Continental Shelf Lands Act (67 Stat. 462, 43 U.S.C. 1331 et seq.). 



III. Current Procedure 

BACKGROUND 

Under the Mineral Leasing Act of 1920, 1 the Acquired Land Leasing 
Act of 1947, and the Outer Continental Shelf Lands Act of 1953, the 
Department of the Interior is charged with the responsibility of 
leasing public lands for oil and gas development to meet public needs. 
Congress directed the Department of the Interior to lease the OCS 
"in order to meet the urgent need for exploration," but little other 
guidance was offered. 

The Department of the Interior has stated that its major goals and 
objectives with respect to the management of the publicly owned 
mineral resources are: 2 

(1) to assure orderly and timely resource development; 

(2) to protect the environment; 

(3) to insure the public a fair market value return on the dis- 
position of its resources. 

The Department claims that the three major goals and objectives 
as applied in its mineral programs are not mutually incompatible. Its 
stated goal is to achieve an optimum balance among the three with the 
objective of encouraging exploration, development, and production, 
while assuring the public a fair market value return for the resource. 

Sections six and eight of the OCS Lands Act of 1953 prescribe the 
basic criteria and requirements of OCS petroleum leasing. The pri- 
mary provisions include the following: 

(1) the tracts must not exceed 5,760 acres; 

(2) leases will be valid for five years or for as long as oil and gas 
is extracted in commercial quantities; 

(3) bidding will be by sealed competitive bids and will be, at 
the discretion of the Secretary of the Interior, on the basis of one 
of the following methods: 

(a) a competitively bid bonus with fixed royalty and rental 
rates ; 

(b) a competitively bid royalty with a fixed rental rate and 
a fixed bonus; 

(4) the royalty rate is to be a minimum of 12% percent of 
the market value of all petroleum saved, removed, or sold; 

(5) a bonus and an annual rental is to be charged for each acre 
leased. 

The act specifies a minimum royalty of 12% percent, but by tra- 
dition a rate of \6% percent (one-sixth) is levied. Even though no 
minimum is specified by law, in the past the yearly rental charged 
has been $3 per acre on OCS lands in "unproven" regions and $10 
per acre in "proven" regions. All rents are now uniform at $3 per acre. 

From the first OCS petroleum lease sale in October 1954 through 

1 Public Law 146, Mineral Leasing Act of 1920 (41 Stat. 437, 30 U.S.C. 181 et seq.). 

2 U.S. Congress, Senate Committee Oil Interior and Insular Affairs. Federal Leasing and 
Disposal Policies Hearings, 92nd Congress, 2d Session, June 19, 1972. Washington. 1 S 
Govt. Print. Off., 1972 : p. 38-9. 

(15) 



16 

May of 1975 a total of 5,249 tracts (oil and gas) were offered for lease. 
Of these 5,249 tracts, bids were received on 2,816, of which 2,522 
received acceptable bids and were leased (see fig. 8). Through 1974 
this had produced revenues of about $14.8 billion in bonuses, $3.2 
billion in royalties, and $139.1 million in rentals. As shown in fig. 9, 
the total cumulative revenue through 1974 roughly totaled $18.2 
billion. A bonus bid of $39,110 per acre in the October 1974 lease sale 
was the highest ever received, while in a 1959 sale the highest bid 
received was $16.17 per acre. It is evident from figures 8 and 10 that 
the average bid per-acre has risen erratically over time and has even 
declined in recent sales. Figure 11 shows that OCS lease sales have 
not been evenly scheduled. In 1956, 1957, 1958, 1961, and 1965 no 
OCS tracts were offered for lease but during 1974 more than 5 million 
acres were offered. 3 From October 1954 through May 1975, the average 
number of bids per tract was 1.8 while the average number of bids per 
tract on which bids were received was 3.3. 



8 Until 1971 the Department of the Interior had no announced formal future leasing plan. It is reported by 
Kash, White, et al., in Energy Under the Oceans (Oklahoma; University of Oklahoma Press: 1973) that 
"Successive Secretaries of the interior have pursued a policy of pacing the development of OCS oil and gas 
resources with leases being parcelled out at a rate that has kept the offshore industry hungry and bonuses 
high. Conservation and waste seem to have been treated as antonyms." 



17 



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19 



FIGURE 10 
PERCENTAGE OF LEASES ACQUIRED 



90 


70 


16 


10 


4 


$295 


121 


60 


18 


14 


7 


396 


147 


75 


12 


7 


5 


532 


206 


56 


12 


25 


6 


186 


216 


69 


15 


10 


6 


288 


158 


46 


34 


11 


8 


685 


110 


24 


21 


12 


43 


1,097 


118 


35 


8 


19 


39 


1,536 


62 


31 


19 


5 


45 


2,018 


119 


25 


15 


25 


35 


3,108 


100 


8 


9 


21 


62 


2,908 



Groups of 
Groups of majors/ 

Number of Majors majors Independents independents Average bid 

Sale date tracts leased (percent) (percent) (percent) (percent) per acre 

Oct. 13, 1954 

July 12,1955 

Feb. 24, I960.. 

Mar. 13,1962. 

Mar. 16, 1962 

June 13, 1967 

May 21, 1968 

Dec. 15, 1970 

Sept. 12, 1972. 

Dec. 19, 1972 

June 19, 1973 

Source: U.S. Congress, Senate, Committee on Interior and Insular Affairs. Market performance and competition in the 
petroleum industry. Hearings, 93d Cong., 1st sess., Nov. 28, and 29, 1973. Washington, U.S. Government Printing Office, 
1974, p. 106. 

FIGURE 11 

OCS ACRES OFFERED FOR PETROLEUM LEASE AND LEASED 

Percent leased 

of acres 

Acres offered Acres leased offered 

1954 859,788 461,870 54 

1955 674,095 402,567 60 

1956 

1957 O C 

1958 ...... 

19S9l""""™I""II""""I"I""""I""II~IIII""~I:I 539,813 171,300 "" """32 

1960 1,610,983 704,526 44 

1961 

1962 3,713,116 1,924,504 52 

1963 669,777 312,945 47 

1964 1,124,102 613,526 55 

1965 

1966 265,886 141,768 53 

1967. : 971,489 744,456 77 

1968 1,315,984 934,164 71 

1969 190,153 108,657 57 

1970 666,845 596,040 89 

1971 55,872 37,222 67 

1972 970,711 826,195 85 

1973 1,514,940 1,032,570 68 

1974 5,005,881 2,186,363 44 

Source: U.S. Department of the Interior, Bureau of Land Management, New Orleans Office, Outer Continental Shelf 
statistical summary. 

The Bureau of Land Management (BLM) is charged with the 
Departmental responsibility to implement the leasing objectives of 
the Outer Continental Shelf Lands Act. The BLM has the responsi- 
bility of insuring (1) orderly and timely resource development, (2) 
protection of environment, and (3) receipt of fair market value. 

BLM coordinates its efforts with the United States Geological 
Survey (USGS) which provides technical advice throughout several 
of the leasing procedures. The USGS is responsible for supervising 
and regulating exploration, development, and production activities 
on the leaseholds after leases are issued, including the maximum 
efficient rate (MER) of production (applicable to the entire reservoir) 
and the maximum production rate (MPR) (applicable to individual 
wells). The production rates, as well as drilling requirements, plugging, 
surface and subsurface safety, pollution, platform structure require- 
ments, and inspections, are regulated by OCS orders issued by USGS. 



20 

Under section II of the OCS Lands Act, the USGS is authorized 
to grant preleasing geological and geophysical exploration permits 
on the OCS. 

The leasing procedure on the OCS consists of eight major com- 
ponents: 4 

1. Proposed Schedule — Provisional OCS Leasing. 

2. Call for Nominations. 

3. Tract Selection. 

4. Environmental Analyses. 

5. Program Decision Option Document. 

6. Pre-Sale Evaluations. 

7. Sale. 

8. Post-Sale Analyses. 

PROPOSED SCHEDULE PROVISIONAL OCS LEASING 

The proposed schedule is the framework used to determine the 
timing and initiation of individual sale procedures, and it is continually 
updated and revised as new resource information becomes available 
and as national energy needs change. An analysis is made in broad 
terms of when, where, and how much oil and gas acreage to offer for 
lease. This is done through a review of the national energy situation 
and the identification of future supply-demand imbalances. Deficits 
are identified by matching projections of future non-OCS supplies 
of oil and gas and future OCS production from existing leases with 
future projected demand. Demand forecasts are made on a regional 
basis, using the regions of the Future Requirements Committee for 
gas and the Petroleum for Administration of Defense districts for oil. 
New OCS sales are proposed in order to meet rising deficits, and alter- 
native schedules are tested with respect to the impact on demand. 

The different options are also reviewed from the perspective of 
receipt of fair market value. The size and frequency of sales can 
induce or inhibit competition which in turn can reduce the Govern- 
ment's receipt of fair market value. In 1972, two general lease sales 
of 300,000-600,000 acres each were scheduled for each fiscal year. In 
response to the April 18, 1973, Presidential energy message, this sched- 
ule was increased to three sales per fiscal year of up to 1 million acres 
each. New schedules have proposed even larger sales, up to 10 million 
acres, but these are subject to regular revisions and modifications as 
the level of knowledge expands (sec fig. 12). In a recent announce- 
ment, the Interior Department increased the offshore leasing schedule 
to six sales per year from 1976 through 1978, including at least one 
sale in each of the Atlantic, Pacific, and Alaskan offshore frontier 
area 



» U.8. Department of the Interior, Bureau of Land Management press releaae, 1975. 

5 Department of the Interior, News Release "Interior Approves Aeceleratod Offshore Oil and Gas Loas- 
lng," October 2, 1975. 



21 



PROPOSED OCS PLANNING SCHEDULE 



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Bureau of Land Management 



Figure 12 



CALL FOR NOMINATIONS 

The call for nominations is an official notice to the oil and gas 
industry published in the Federal Register to obtain an indication of 
industry interest in individual offshore tracts which may subse- 
quently be offered for lease. Calls are issued for large contiguous 
areas after covering several million acres off the coast of a single state. 
Industry is normally allowed a period of 60-90 days to submit tract 
nominations. 

TRACT SELECTION 

After nominations have been received, specific tracts are selected 
for possible lease offering. This is a joint responsibility of the BLM 
and the USGS. In the tract selection process, the Interior Department 
gathers and reviews more detailed geophysical, geological, engineering 
and economic resource information and nominations on areas proposed 
for sale. The BLM's responsiblity involves an evaluation of (1) the 
number of weighted and non-weighted nominations per tract; (2) the 
need to initiate leasing in wildcat areas in terms of industry develop- 
ment capability, competition, and timely future availability of re- 
sources to consumers; (3) tract leasing history; (4) nomination 
patterns; (5) consideration of a mix of tracts by water depth, distance 
from shore; (6) and identification of tracts deleted from prior sales for 
environmental impact reasons or for which special environmental 
stipulations have been developed. The responsibility of the USGS 
involves a technical evaluation to ensure proper consideration of the 
development of geologic structures and trends and identification of 



22 

tracts in imminent danger of drainage, tracts which are most prospec- 
tive for production, and tracts demonstrating a need for or suscepti- 
bility for prompt drilling and development. Based on these agency 
analyses, a joint BLM-USGS field office review is made to prepare 
final recommendations of tracts. The Washington offices of BLM and 
USGS, after a review of the joint field reports, make the final tract 
selection for the sale within existing policy guidelines. A list of the 
selected tracts is published in the Federal Register prior to the availa- 
bility of the draft Environmental Impact Statement. 

The USGS obtains its information from data that it purchases on 
the "open market" from geophysical exploration companies as well as 
from confidential industry submittals on OCS tracts already in 
production. 6 The USGS has several other sources and can, if necessary, 
produce its own data. Prior to submitting a bid on an OCS tract, 
petroleum firms obtain seismic survey data on the tract from the 
"open market." Though there is a limited amount of information 
trading among oil producers, most production data is not available 
to prospective bidders. As a consequence, the USGS tends to have an 
information edge over the bidders. 7 

"Open market" seismic survey data on the subterranean geological 
formations is gathered by trailing behind ships detection devices that 
receive the echoes which are sent out by an energy generating device 
and bounced off the floor of the ocean. This may cost anywhere from 
$65 to $1,200 per line-mile and on the average 20,000 line miles are 
needed per million OCS acres. 8 As a rule of thumb, OCS data costs 
about $350 per line-mile or about $40,000 per standard tract. 

The Department of the Interior does not require each petroleum 
company exploring the OCS to submit exploratory data and analysis 
because, first, the USGS does not have the manpower and equipment 
to evaluate all of it, and second, it is argued by the Department of the 
Interior that this would be tantamount to forcing a company to 
testify against itself. 9 However, the Department of the Interior does 
have a mandatory reporting system of certain geological and engineer- 
ing data obtained by the lessee in the development and production 
stages of a tract. 

ENVIRONMENTAL ANALYSES 

This component involves the preparation of environmental impact 
statements under Section 102 (2)(c) of the National Environmental 
Policy Act of 1969. A draft Environmental Impact Statement (EIS) is 
first prepared, a public hearing is held, and a final EIS is prepared for 
all OCS oil and gas lease sales. Consultation and coordination with 
interested Federal agencies is routinely undertaken in preparation of 
EIS concerning proposed OCS lease sales. The EIS analysis discusses 



• A large part of the data obtained by the USGS is seismic survey data that is purchased on the open 
market. There are several commercial survey companies who collect and Bell such data. Often prospective 
petroleum lease purchasers will join together to hire an exploratory company in order to lower the cost of 
data. This cart lower the company cost of data to as little as $i<» per line mile. Due to legal considerations, 

1 18 does not join in these ventures hut under the usual "newcomers" clause the USGS can purchaso 

the data --it ii later date. 

I In tolo, the petroleum industry has nioiv information on anv particular tract than does the U8G8, HOW 

ever, because arms do not freely exchange their information, on the average each petroleum Arm has loss 

information on any particular trait than docs the QSGS. 
• mile is one ship traveling in a line for one mile. 

Hon e. Committer on the Judiciary, Subcommittee on Immigration, Citizenship, and 

International Law. Outer Continental Shelf Oil and I has. Savings, 98rd Congress, 'Jd Session. January 24, 

bruary 7, March 6 and 14, 1974. Washington, c.s. <; vt. Print, otf., i<»74: p. 404. 



23 

the impact of a proposed sale on a tract-by- tract basis, and it contains 
the following information : 

1. Description of the proposed action. 

2. Description of the environment. 

3. Environmental impact of proposed action. 

4. Mitigating measures included in the proposed action. 

5. Any unavoidable adverse environmental effects. 

6. The relation between local short-term use and maintenance 
and enhancement of long-term productivity. 

7. Any irreversible or irretrievable commitment of resources. 

8. Alternatives to the proposed action (including alternate 
sources or resources) . 

9. Coordination and consultation with others. 

The draft EIS is made available to the public and is sent out for 
comment by Federal agencies with jurisdiction or expertise, by 
State and local agencies authorized to develop or enforce environmental 
standards, and by anyone else requesting a copy. Thirty days after 
the draft has been made available, a public hearing is held. Anyone 
who wishes to do so may comment on the proposed action at the 
hearing. 

The Final EIS is then prepared after comments on the draft (solic- 
ited and unsolicited) and testimony from the hearing are analyzed. 
After the incorporation of any new relevant information, unresolved 
issues, or attitudes toward the proposed action, the necessary revisions 
are made on the draft and the final EIS is then submitted to the 
Council on Environmental Quality (CEQ). 

PROGRAM DECISION OPTION DOCUMENT 

At the time the final statement is being prepared, a Program De- 
cision Option Document (PDOD) is also prepared. The PDOD brings 
to the decision-maker's attention the non-environmental factors 
associated with the proposed action. The non-environmental factors 
discussed in a PDOD include the economic, social, and political impact 
of the proposal and its effect on the Department's budget and pro- 
grams. This document, in conjunction with the final environmental 
impact statement, provides the Secretary of the Interior with infor- 
mation necessary to evaluate the total impact of the proposed action. 

PRESALE EVALATIONS 

Prior to a lease sale, the USGS calculates pre-sale values of the OCS 
tracts offered for lease with BLM performing an audit and review 
function. USGS provides the geologic, geophysical and engineering 
inputs which are obtained through analysis of industry data submitted 
to the Government and through the purchase of seismic information. 
BLM provides certain economic inputs including estimates of capital 
and operating expenses, discount rates, and procedures to follow in 
calculating taxes. 

A formal evaluation agreement, signed December 1971, between 
BLM and USGS, established the responsibilities of each organization 
in the evaluation process. Under this agreement the Geological Survey 
field office furnishes to the BLM Washington office, at least 3 weeks 
prior to the sale, detailed reliability categories for each tract indicating 



24 

the adequacy of avilable technical data. At the same time it also 
indicates other factors that will be used in the resource evaluation. 
Prior to the sale, the USGS field office gathers data on all the tracts 
in the sale and then places on each tract one or more potential value 
estimates, normally calculated using a discounted cash flow. 

In estimating the fair market value of petroleum, USGS examines 
the data gathered on the tracts to be leased, as well as data from nearby 
areas already in production, before setting a minimum acceptable bid. 
The evaluation takes place in secrecy, and the value of the minimum 
acceptable bid may be released only after the leasing process is 
completed. Because of the imprecision in evaluating this type of data, 
and often due to the lack of "hard" production data, there is occasion- 
ally a great difference between the evaluation given by the USGS to 
a particular tract and the evaluation given by the petroleum com- 
panies. For example, in the December 1973 sale, tract number 032005 
had a presale USGS evaluation of $3,625,432 but the winning bonus 
bid was $32,232,000 (the next highest bid was $8,067,600). In the 
same sale, tract number 032077 was valued at $144,000 but sold 
for $76,827,600. 

At least 1 week prior to the sale, the USGS field office provides the 
BLM evaluation review team with the tract values that have been 
calculated. The review team receives the reserve estimates and all 
pertinent data used in the evaluation process. On the day before the 
sale, the review team submits to the responsible USGS and BLM 
officials a report indicating the team's findings with respect to its 
review of the USGS presale evaluation procedures and discusses any 
area of possible concern regarding selected evaluation inputs such as 
price, discount factors, and taxation methods. 

Ninety days after a sale, BLM reviews and analyzes the manner in 
which the presale evaluation procedures were implemented. This 
analytical review identifies areas where research is needed and sug- 
gests changes in the presale evaluation process for use in succeeding 
lease sales. As needed, the Interior Department further reviews and 
analyzes its sales operations and procedures in order to improve the 
conduct of future sales. 

SALE 

The terms and conditions of each lease sale are published in the 
Federal Register at least 30 days prior to the sale date. Sales are 
conducted by the manager of the appropriate BLM leasing office 
pursuant to the detailed procedures that are issued by him prior to 
each sale. Following the opening of sealed bids each i^ checked for 
technical and legal adequacy, qualifications of bidders, sufficient 
advance bonus (20 percent at time of bidding), powers of attorney, 
compliance certificates, and bonds. Foreign companies are not per- 
mitted to buy OCS leases, although domestic subsidiaries of the 
companies are eligible. 

POSTSALE ANALYSIS 

Following a -ale, the Bureau of Land Management conducts a 
procedural review of the high bids to assisl the manager in his deter- 
mination of whether particular leases should be granted. The primary 
emphasis in the post -ale analysis i- on the receipt of fair market value 
granted. 



25 

The factors considered in the analysis of the sale are: 10 

(1) the type of tract — whether the tract is drainage, develop- 
ment or wildcat; 

(2) the total high bid ; 

(3) the Geological Survey's reliability rating — this refers to the 
quantity and quality of the USGS data; 

(4) mean range of values (ROV) — the mean ROV is the Survey's 
undiscounted estimate of the value of the tract and is obtained 
by averaging the 500 tract values obtained from the computer 
run "Monte Carlo" simulation; 

(5) the high bid as a percent of the mean ROV; 

(6) discounted mean ROV — the mean ROV is discounted at 
10 percent for two years; 

(7) high bid as a percent of discounted mean ROV; 

(8) average evaluation of tract — the sum of the bids on the 
tract plus the government's pre-sale value which is divided by 
the number of bids plus one; 

(9) high bid as a percent of the average evaluation of tract; 

(10) number of bids on the tract; 

(11) average number of bids per tract by type of tract; 

(12) the tract's deviation from the average/mean deviation by 
type of tract — indicates whether there is concensus on the tract 
value; 

(13) bidding performances of high bidder by quartiles — shows 
how the high bidder bid on other tracts in the sale; 

(14) average number of bids on tracts on which the high 
bidder bid; 

(15) potential environmental hazard; 

(16) geologic/bottom hazards; 

(17) history of the tract — whether the tract has been leased, 
offered or nominated before; 

(18) miles tract is from shore; 

(19) miles tract is from pipeline; 

(20) water depth; 

(21) other considerations — any other factors which may have 
an impact on the decision (i.e. special stipulations to be imposed 
on tract if leased). 

Analysis of each sale is necessary in order to provide the following 
information to the manager to aid in the determination of whether 
particular leases should be issued: (1) leasing history of the tract, such 
as information concerning the number of times a tract has been nom- 
inated and offered, including bids submitted and rejected and (2) 
status of production in the area. If some tracts are being drained or 
could be drained by production from adjoining tracts on the same struc- 
ture, an analysis of the effect of not leasing a tract on the initial or 
ultimate development of the structure is required. 

Protection of the environment is more heavily weighted in the earlier 
phases of an OCS leasing action. In the postsale analysis, however, new 
or additional environmental information is considered along with in- 
formation developed in the environmental impat statement. 

Following the review, recommendations to accept or reject high bids 
that were submitted at the sale are made by the BLM OCS field office 
manager. Normally this entire procedure, starting with a call for 
nominations, usually takes approximately 12 months. 



i" U.S. Department of the Interior, Bureau of Land Management. 



26 

In order for the highest bid to be accepted as the winning bid it 
usually must be equal to, or greater than, the minimum acceptable bid 
set by the USGS as well as meeting certain other criteria. In the 
July 1974 Louisiana and Texas OCS lease sale, 49 tracts were bid on 
but only 19 received acceptable bids and were leased. Rejected bids 
are not always insubstantial. For example, in the July 1974 sale a 
per-acre bonus bid of $65.62 won the lease for tract number osl005 
while the highest per-acre bonus bid on tract number osl039, $439.58, 
was rejected as being insufficient. The Department of the Interior 
reports that in no case has a bid been rejected on the grounds of 
increasing the market share of a firm or of being anticompetitive. 

The minimum bid considered is $25.00 for each acre leased, but 
BLM is not required to accept such a bid. In addition to the cash 
bonus, the lessee must pay in advance an annual rental of $3.00 per 
acre to BLM. The rental is suspended at any time the royalty payment 
exceeds the equivalent of $3.00 per acre. 

By law, any tract that is not in production five years after the actual 
date of leasing reverts to the Federal Government. If development 
progress can be shown, however, the production deadline can be ex- 
tended up to an additional five years. The lease-reversion rate is sub- 
stantial. Of the almost 1,600 leases sold prior to 1974, nearly 40 percent 
had been relinquished. On tracts that had been leased more than five 
years earlier, the reversion rate reached 60 percent. Although the 
bonus is not refundable if a lease proves unproductive, the tax laws 
do permit the bidder, once the tract is abandoned, to deduct the bonus 
for a tax savings of 48 percent of the amount of the bonus. 

On the initial exploratory well, which can be drilled only after the 
lease is awarded, the chance of finding petroleum in economically 
recoverable quantities is about one out of six. In "wildcat" regions 
of the OCS the success ratio is even lower. 11 Exclusive of contracting 
and information costs, the estimated cost per exploratory well drilled 
on the OCS is $1,000,000. The cost of a single drilling rig or platform 
can range from $10 million to $40 million, depending on the type of 
rig and the depth of the water in which drilling is to take place. 

COMPETITION 

The OCS leasing system has inadvertently allowed the majority of 
leases to be captured by the larger oil companies, and some economists 
assert that this has led to increased market concentration and in- 
creased oligopolistic power. Until November 1, 1975, OCS leasing 
regulations did not prohibit joint bidding and, as a result, it was 
common practice for the major oil concerns to join together in order 
to capture a lease (see fig. 13). On that date, however, the Interior 
Department established new regulations that prohibit joint ventures 
between companies that produce more than 1.6 million b/d of crude 
oil, natural gas, or liquefied petroleum products worldwide between 
January 1 and June 30, 1975. This list will bo reviewed every six 
months, al which time it will be updated and a new "bidding period" 
will begin. Initially, 9 of the L26 companies that have filed production 
statements will be barred from joint bidding in offshore oil and gas 



11 The risk Involved Is well Illustrated l>y the Washington-Oregon OC8 experience After investing nearly 
100 million dollars and five years of drilling on tioo.iMHi ()( S acres, the oil companies were unable lo locate 
any oil • 



27 

lease sales, although they will be allowed to bid jointly with smaller 
companies that are not on the restricted list. 12 

JOINTLY OWNED LEASES (FEDERAL DOMAIN) 



Amerada, Marathon 
Signal, La. Land 



Sun, Murphy, 
Burmah 



Placid, Ashland, 
Hunt, Transocean 



Sun, Anadarko, 
Diamond Shamrock 



Texaco, Tenneco 




Tconeco, Columbia Gas, 
Forest, Texas Gas, 
Consolidated Gas 



Cetty, Atlantic, 
Cities, Continental 



Atlantic, 
El Paso 



Phi 11 Irs. Cull 



Figure 1.3 

Source: U.S. Congress. Senate. Committee on the Judiciary. Subcommittee on 
Antitrust and Monopoly. The natural gas industry. Hearings, 93rd Congress, 1st 
session. June 26, 27 and 28, 1973. Washington, U.S. Govt, Print. Off., 1973. pt. 1, 
p. 489. 



12 The 9 companies prohibited from joint bidding are the Amoco Production Company, BP Alaska Ex- 
ploration, Inc., Chevron Oil Company, Exxon Corporation, Gulf Oil Corporation, Mobil Oil Corporation, 
Shell Oil Company, Standard Oil Company of California, and Texaco, Inc. 



63-732 O - 76 - 3 



28 

This concentration of oil lease ownership is evidenced by the fact 
that nine of the largest oil producing firms in the United States are 
also among the ten largest OCS lease holders and that these ten firms 
hold 62 percent of the total OCS acres leased (see. fig. 14). 13 Shell, 
Texaco, Gulf, Exxon, Chevron, and Continental account for about 70 
percent of the oil produced from all offshore oil wells (State and Federal 
lands) in the Gulf of Mexico (see fig. 15). The 17 largest operators own 
90% of all producing Federal OCS leases and produce 92% of the oil 
from those leases (see fig. 16). The probability of a large company 
wanning an OCS lease, therefore, appears to be significantly higher 
than that of a small company (see fig. 17). On the average, in four 
sales between September 1972 and December 1973, the major petro- 
leum firms acquired more than 61 percent of the OCS acreage leased. 

On October 16, 1974, the Department of the Interior experimentally 
tested for the first time the royalty bidding method on 10 of the 300 
tracts that it offered. The purpose of this experiment was to determine 
the extent to which royalty bidding leads to greater competition, 
government revenues and production efficiency in OCS petroleum 
production. Of the ten tracts offered, eight received bids and were 
subsequently leased. The highest winning royalty bid was 82.165 per- 
cent (of the market value of the petroleum saved, sold or removed), the 
lowest winning bid was 51.7979 percent, and the average winning 
royalty bid rate was 68.2 percent. This experiment will take some time 
to evaluate, for up to five years may elapse before production begins 
and several additional years may pass before the data is gathered and 
analyzed. 

FIGURE 14 
OWNERSHIP OF OCS LEASE ACREAGE 



Percent of 

OCS lease 

acreage 


U.S. 

production 

ranking 


Chevron 10.6 


5 


Texaco 9. 5 


2 


Exxon 9.4 


1 


Shell 7.5 


4 


Union 4.7 


9 


Atlantic-Richfield 4.6 


7 


Gulf 4.4 


3 


Continental.. 4. 1 


13 


Mobil.. 3.8 


8 


Amoco 3.4 


6 






Largest 10 62.0 




Source: Leland, Hayne E., Richard B. Norgaard, Scott R. Pearson. "An Economic Analysis of Alternative Outer Con- 
tinental Shelf Petroleum Leasing Policies," National Science Foundation, 1974. p. 17. 



"Leland, Hayne E., Richard B. Norgaard, Scott R. Pearson. An Economic Analysis of Alternative 
Outer Continental Shelf Petroleum Leasing Policies, National Science Foundation, 1974: p. 9-20. 



29 



FIGURE 15 
OFFSHORE AND OCS OIL PRODUCTION 
[Dollar amounts in millions! 



Producer 











Production 


in Federal 


Gulf of Mexicc 


production, 






waters through 1968 


State and Fee 


eral, 1971 ■ 


Corporate incomt 


1972 J 


cumulative* 


Oil and 


Oil and 




condensate 


Percent 






condensate 




(thousands 


of total 


Gross 


Net 


(thousands 




of barrels) 


production 


income 


income 


of barrels) 


Bonus paid 


105, 496 


17.1 


$4, 591 


$245 


221, 5C0 


$284 


96,959 


15.7 


7,529 


9C4 


16,800 


407 


95, 428 


15.5 


5,940 


561 


162, 800 


271 


73,719 


11.9 


18, 700 


1,466 


244, 900 


519 


72,698 


11.8 


5,143 


511 


275, 400 


198 


44,520 


7.2 


3,262 


109 


65,300 


75 


16,646 


2.7 


1,315 


29 


(*) 


22 


16,620 


2.7 


O) 


0) 


( 5 ) 




15,131 


2.5 
2.3 


603 
1,873 


51 
115 


7,108 
50, 000 




14,367 


81 


12, 596 


2.0 


8,243 


541 


38, 600 


188 


10, 902 


1.8 


2,841 


184 


23, 400 


105 


9,907 


1.6 


61 


11 


4,800 


120 


7,148 


1.2 


(<) 


0) 


( s ) 




5,444 


.9 


4,054 


342 


16, 4C0 


48 


3,897 


.6 


3,658 


199 


40, 000 


85 


3,414 


.6 


1,939 


152 


( 6 ) 


16 


1,515 


.2 


O) 

135 


( 4 ) 


8,500 




1,104 


.2 


4 


3,200 


16 


1,086 


.2 


2,363 


132 


34, 400 


68 


1,031 


.2 


555 


38 


(*) 


24 


1,020 


.2 


731 


33 


(«) 





Shell Oil Co . 

Texaco, Inc 

Gulf Oil Corp 

Exxon Co., U.S.A... 

Chevron Oil Co... 

Continental Oil Co 

Signal Oil & Gas Co 

Placid Oil Co 

Kerr-McGee Corp 

Union Oil Co. of California... 

Mobil Oil Corp 

Tenneco Oil Co 

Ocean Drilling & Exploration. 

Lake Washington, Inc. 

Amoco Products, Co.. 

Atlantic Richfield Co 

Sun Oil Co. 

Southern National Gas Co... 

Superior Oil Co 

Phillips Petroleum Co 

Skelly Oil Co 

Pennzoil Products Co.. 



1 Clean Gulf Associates Oil Spill Contingency Agreement; exhibit B, percentage participation of members (July, 1972). 

^ Moody's Industrial Manual— 1972, Moody's Investors Service, Inc. New York, N.Y. 

8 Offshore petroleum studies, Bureau of Mines Information Circular— IC 8557. 

1 Not available. 

* Not in top 20 producers; top 20 produced 97.7 percent of total. 

Source: Kash, Don E. and Irvin L. White et. al. "Energy Under the Oceans," University of Oklahoma Press, 1973, p. 94. 



30 






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31 



FIGURE 17 

PERCENTAGE OF SUCCESS IN WINNING OCS TRACTS 

[Based on acreage: percent participation considered for bidding combines] 



73.8 
57.2 


26.2 
42.8 
71.3 
15.0 


62 

116 


28.7 
85. 


97 
87 







Number of 
Sale date Majors Others tracts 

Sept. 12, 1972 

Dec. 19, 1972 

June 19, 1973 

Dec. 20, 1973 

Unweighted average 61.2 38.8 90.5 

Source: U.S. Congress. House. Committee on the Judiciary. Subcommittee on Immigration, Citizenship, and International 
Law. Outer Continental Shelf Oil and Gas. Hearings, 93d Cong., 2d sess., Jan. 24, 30; Feb. 7; Mar. 6 and 14, 1974. Washington. 
U.S. Government Printing Office 1974. p. 437 

On January 23, 1974, President Nixon announced in his energy 
message that the 1975 target for OCS leasing would be 10 million acres. 
This was a significant increase in the rate of OCS development and 
would have been comparable in size to the total of OCS acres leased 
as of July 1974 (10,101,000 acres). Based on previous lease-sale 
experience, this would have necessitated a total offering of 20 million 
of OCS acres. The Department of the Interior had tentative plans to 
offer a total of 16.1 million OCS acres for lease in 1975, including 3.0 
million acres off of South Texas, 2.9 million acres in the Central Gulf, 
1.5 million acres off of Southern California, 1.7 million acres in the 
Cook Inlet, 3.5 million acres in the Gulf of Alaska and 3.5 million 
acres in the Mid-Atlantic region. Critics charged, however, that such 
a large area could not be effectively developed and that the only 
result would be diluted bidding and reduced Federal revenue. In its 
revised schedule (fig. 12), the Interior Department now plans to offer 
considerably less than ten million acres. 

DISADVANTAGES OF CURRENT SYSTEM 

It has been stated that the Federal OCS leasing policy should 
be designed to maximize the present value of the natural resource to 
society. Under this concept, maximizing the net present social value of 
petroleum requires consideration of more factors than just the level of 
Government revenues. 

In a paper prepared for the National Science Foundation on Federal 
Outer Continental Shelf leasing policies, it was pointed out that bonus 
bid leasing has been accompanied by the following five fundamental 
changes: 14 

1. A Switch from Private to Public Lands. — 'Initially large firms 
or groups of individuals leased oil land primarily from small 
landowners. Clearly, the lessees were more capable of bearing 
risk than were the lessors. In that situation leasing strategies 
which shifted risk to the firms were desirable. OCS leasing policy 
followed the historical precedent even though the situation with 
respect to risks has been reversed. As the lessor, the Government 
can bear risk more easily than potential lessees. 

14 Leland, op. cit., pp. 2-3. 



32 

2. Greater Costs of Drilling. — The OCS requires massive ex- 
penditures for drilling rigs which can be many times more expen- 
sive than onshore rigs. Together with the rising costs of leases 
mentioned below, "front-end" capital costs have risen to the 
point where only the largest firms can diversify their leasing 
activities. Yet, simultaneously, there is a rising policy interest 
in increasing competition in the petroleum industry. 

3. Rise in the Price of Oil. — The "energy crisis" and uncertain 
supplies have led to a doubling in the price per barrel of crude. 
Consequently, bonus bids on desirable lease tracts have soared. 
Bonus payments have risen relative to royalties, creating an 
undesirable transfer of risk from the public lessor to the private 
lessee. 

4. Greater Market and Environmental Uncertainties. — Con- 
currently with the increase in leasing outlays, the riskiness of 
return has increased. Fluctuations in oil prices have been magni- 
fied in changing profits. Market uncertainties have become 
perhaps the greatest source of risk because appropriate diversi- 
fication is difficult. A further source of uncertainty is the en- 
vironmental hazard associated with OCS drilling. Leaks and 
ruptures can lead to large clean-up or reparation costs, further 
increasing the riskiness of OCS operations. 

5. Greater Reliance on OCS Resources. — Historically, petroleum 
from the OCS has been a small portion of U.S. production 
amounting to only 5 percent of total U.S. output two decades 
ago. Crude oil reserves on the OCS, however, amounted to about 
21 percent of U.S. reserves. The percentage of OCS production 
and reserves will increase in the future simply because virtually 
all of the petroleum provinces in the continental U.S. have been 
explored and developed, whereas only about 10 million acres of 
the more than 500 million acres (200-meter contour) of the 
OCS have been leased and explored with the drill. The recent 
monopolistic behavior of the Organization of Petroleum Ex- 
port ing Countries (OPEC) has increased the value and im- 
portance of domestic resources and greatly increased interest 
in accelerating production from our OCS. 



IV. Alternative Leasing Methods 

GENERAL CONSIDERATIONS 

It has been argued that the current leasing system has resulted in 
a situation that is not consistent with the goal of maximizing the net 
social value of our OCS petroleum resources. As a result, alternative 
methods of leasing are being given increasingly serious consideration. 
In evaluating alternative leasing methods there are five general 
policy objectives that can be considered in maximizing the social bene- 
fits of the resource. They are (1) generating adequate Government 
revenues, (2) preserving the environment, (3) promoting competition, 
(4) discovering resources at the optimum rate, and (5) developing the 
resources at the optimum rate. In general, it will not be possible to 
meet all of these policy objectives with the same leasing method, so 
trade-offs and compromises must be made. 

Risk is the crucial factor affecting the economic efficiency of all 
leasing methods. In a theoretical case in which there is no uncertainty, 
the amount and location of resources in each OCS tract, as well as 
production costs and the market value of the resource, are known 
with certainty. The winning bid, therefore, will come from the firm 
that has the lowest costs. Large firms will not have the advantage 
of being able to spread risk over several tracts, and consequently 
all firms will be able to compete on the basis of efficiency for funds 
in the capital market. The Government will obtain the maximum 
amount of revenues possible because all firms will be willing to pay 
the full amount of the value of the resources less the "normal" rate of 
return on investment. Consequently, no firms will receive "wind- 
fall" profits either because of lack of competition or because of "luck." 
Because conditions are known with certainty, resources will be 
discovered and developed at the socially optimal rate; there will be 
no rush to overdevelop nor any reason to underinvest in equipment 
or in exploration. Theoretically, with perfect knowledge the socially 
optimal level of environmental preservation will also be achieved. 
Under the theoretical situation of no uncertainty, a royalty increases 
the per-unit costs and, therefore, it alters the production decision and 
leads to a sub-optimal utilization of the resource. A bonus, however, 
is extracted prior to production and consequently has no direct effect 
on the production decision. A firm will normally extract the resource 
until the cost of production equals or exceeds the value of the re- 
source produced. Royalties increase the cost per unit of production, 
therefore, the royalty bidding method can lead to an earlier shutdown 
than would be likely with the bonus bid system. Instead of producing 
quantity OQl in figure 18 (as would be the case with the bonus bid 
lease), the firm will limit production to OQ2 with the royalty lease. 
Because the production cost per unit increases (or revenue per unit 
decreases) as the royalty percentage increases, the greater royalty 
rate the earlier the shutdown. 

(33) 



34 



PRODUCTION DECISION GRAPH 



Marginal 
Revenue 

and 

Marginal 
Cost 



MC2 




Q2 



Ql Quantity 
Produced 



Marginal Revenue 
Marginal Cost 

MC 1 
MC 2 



— The revenue from an additional barrel of petroleum 
The cost of producing an additional barrel of 
petroleum 

— Marginal Cost vith bonus bidding 

— Marginal Cost with royalty bidding 

Figure 18 



It can be argued that in a world without uncertainty or risk, a 
royalty lease is economically less efficient than is a bonus lease. A 
royalty reduces the revenue from each additional barrel produced, 
which decreases the incentive to explore and to produce and will 
ultimately lead to lower Government revenues, to a smaller petroleum 
supply, and to higher costs to the consumer. Even though the U.S. 
('ode of Federal Regulations does provide for reduction of royalties 
or rentals to promote development of leases which would otherwise 1 
h<- uneconomic, the provision has never been invoked. 1 

The "real world", however, is not risk-free. As noted earlier, the 
probability of finding petroleum in commercially recoverable quanti- 
ties in ail exploratory well is about one out of six. The four major 



U.S. Code of fcVd.Tui Regulations, section 2">o. 12, title 80. 



35 

sources of risk involved in leasing on the OCS are (1) the amount of 
recoverable resources located in the tract, (2) the cost of exploration, 
(3) the cost of production, and (4) the future market value of the 
resources. The uncertain nature of the petroleum market has been 
recently illustrated by sharply rising prices, foreign production cut- 
backs and price increases, proposed new energ} r taxes, and the elim- 
ination of special tax provisions. In addition, companies operating on 
the OCS face unlimited liability for oil spills. These factors and others 
have contributed to making OCS petroleum and exploration and devel- 
opment a high-risk venture, while the lack of a significant futures 
market in petroleum has prevented firms from "insuring" against some 
of the inherent risk. 

FIXED ROYALTY WITH BONUS BIDDING 

This leasing method is provided for under the OCS Lands Act of 
1953 and is to date the only method that has been employed to any 
significant degree in leasing the OCS. 2 Under this act the royalty is a 
stated percentage of the value of production and can be paid in cash 
or in kind. Although the OCS Lands Act stipulates a minimum rate 
of 12J4 percent, the royalty rate is usually set at 16% percent. 

Each tract is usually awarded on the basis of the highest bonus 
bid; if the highest bid submitted meets or exceeds the pre-determined 
minimum acceptable level, as well as certain other criteria, then a lease 
is awarded. However, if the highest bid falls below the miuminm 
acceptable level, then the BLM institutes a reevaluation process in 
which all bids are reviewed in terms of geological information, data 
reliability, and other factors in order to determine which of the bids, 
if any, will be accepted. 3 

In the past, the royalty has been set at a rate such that the bonus 
tends to be a large component of total investment. 4 This poses partic- 
ular hazards for the smaller firms because the bonus payment is 
contingent upon the award of the lease and not upon the presence of 
recoverable petroleum, and it is made long before the firm can be 
assured of any return on its investment. Because there is a low proba- 
bility of finding a recoverable pool in any one area, a small firm 
investing a large portion of its resources in a few tracts will run a 
greater risk of bankruptcy than would a large company. Many 
economists argue, therefore, that the only way a firm can "buy insur- 
ance" under this leasing arrangement and current market conditions 
is to purchase a large number of tracts in order to spread the risk. 
These factors are indicative of the problems small firms have in 
competing with larger firms in the capital market and in absorbing 
the high interest rates that they must pay. 

Since the royalty payment is based on the market value of the 
petroleum produced, a portion of the market risk is shifted from the 
firm to the Government (i.e., society). Thus the economic effect of any 
change in either the market value of petroleum or the quantity 
produced is borne by both parties. Theoretically, the higher the fixed 



2 As noted earlier, an experimental royalty lease sale of 10 tracts took place on October 16, 1974. 

* As reported by the Bureau of Land Management some of the "other" factors taken into consideration 
are: (1) bidding performance of high bidder; (2) average number of bids on tracts on which the high bidder 
bid; (3) potential environmental hazard; and (4) geologic and bottom hazards. 

• According to Kash, White, et al. Energy Under the Oceans, prior to development the bonus payment 
accounts for almost 65 percent of the petroleum firms costs; after development it accounts for moro than 14 
percent of its costs. 

63-732 O - 76 - 4 



36 

royalty rate, the lower will be the winning bonus bid and the greater 
will be the sharing of risk. Of the four types of risk — discovery, 
exploration cost, production cost and market price — royalty pay- 
ments directly transfer only market-price risk. 

There are, however, distinct disadvantages to having a royalty 
payment included in any lease. As noted earlier, the major problem 
is that of early shutdown; the higher the fixed royalty, the earlier the 
termination of production and the greater the amount of petroleum 
left in the OCS. Because of high start-up costs it is doubtful that 
undei present conditions an abandoned field would ever be reopened. 
Further, becau>e royalties affect per-unit output costs, they tend to 
decrease the firm's investment in exploration and total amount of 
tract development. Overall, this can result in lower Governmental 
revenues, smaller supplies, and higher costs to the consumer than 
would be expected without a royalty payment. 

A fixed royalty will cause additional problems if it is set too high for 
firms to make a "normal" rate of return on their investment. This 
could result either in non-development of a held or in bankruptcy of 
the unwary firm. 

FIXED BONUS WITH ROYALTY BIDDING 

The fixed bonus with royalty bidding method is also permitted under 
the provisions of the OCS Lands Act. In this case, a fixed bonus (to be 
paid on award of the lease) is stipulated prior, to bidding, and compe- 
tition is based on the royalty to be paid to the Government. Except 
for ten experimental leases offered in late 1974 this method has never 
been employed on the OCS. 

Royalty bidding can cause some additional problems due to exces- 
sive speculation. If the fixed bonus is set too low, firms have little to 
lose by bidding high royalties, which could lead to early shutdowns 
and incomplete extraction of the petroleum. Theoretically, the lower 
the fixed bonus, the higher will be the winning royalty bid. Royalty 
bidding has the additional disadvantage that it may attract bidders 
who are not as well qualified to develop the lease because of in- 
experience in offshore oil development. 

The primary advantage of a royalty is that it transfers a portion of 
the firm's i i>k to the Government and indirectly to society. If the 
lease tract turns out to be "dry", then both the petroleum firm and 
the Government share the lo>s. An increase in risk sharing could help 
enable >mall firm- t<> enter the held and increase competition, increase 
Government revenue-, and promote a more efficient allocation of 
resources. 

Techniques BUch a- a declining royalty schedule could be imple- 
mented in order to help alleviate the early shutdown problems. 'I his 
would lower the COS< of" production over time and could he expected 

to result in greater extraction of the resource. Any royalty, however, 

will Mill lead to some early shutdown and could result in the non- 
development of some tracts (an extreme case of early shutdown). 

FIXED BONUS Willi RENTAL BIDDING 

Under the OCS Lands Art of 1953, rental bidding with a fixed 

bonus is not permitted (a minimum royalty of 12J^ percent is 



37 

mandatory), and consequently an amendment to the law would be 
necessar}' to implement this method. This system calls for a fixed 
bonus with competitive bidding based on the size of the rental pay- 
ments. If the firm that wins the lease fails to pay the rent, it loses 
the lease. This leasing method also tends to transfer some risk to the 
Government from the firms; if there are no recoverable resources, 
then the firm can drop the lease and lose its "sunk" costs (the drilling, 
bonus and rent costs that have already been paid). Theoretically, it 
can be expected that the lower the fixed bonus, the higher will be the 
winning rent bid. The higher the rental, the greater will be the risk- 
sharing. 

The rental method does appear to share some risk, but not as much 
as with ro}^alty payments. Rental payments are contingent upon con- 
tinued production and not upon market conditions or production costs. 
If the lease is executed during periods of high profitability the rental 
would probably be high. If profitability declines, however, the size of 
the payment would remain the same and could lead to early shut- 
downs. Unlike a royalty scheme in which the shutdown decision is 
made on the basis of production, the rental shutdown decision is 
made on the basis of the rental period. Thus, the yearly marginal cost 
of production, rather than the per-barrel marginal cost of production, is 
the decision variable that is affected. Once the decision is made to 
pay the rent and proceed with production, the rental is viewed as a 
sunk cost not affecting marginal production costs. Since the rental 
payments are made at periodic intervals, however, firms would proba- 
bly attempt to maximize the extraction of petroleum in between pay 
ments. This could lead to additional problems because the total amount 
of petroleum that can be recovered is diminished if attempts to extract 
it too quickly reduce reservoir pressures. 

FIXED BONUS WITH PROFIT-SHARE BIDDING 

As with rental bidding, profit-share bidding would necessitate a 
change in current law. Under this leasing arrangement, a fixed bonus 
would be stipulated and the petroleum firms would compete on the 
basis of the percentage of the profit to be shared with the Government. 

This system, unlike any other, shares all of the risks associated with 
petroleum recovery. Pool-size risk, exploration-cost risk, production- 
cost risk, and market-value risk are shared in proportion to the profit 
share. The lower the fixed bonus, the higher will be the percent profit 
share of the Government. The higher the Government's profit-share, 
the less risk will be borne by the individual petroleum firms and the 
greater it will be borne by the government. 

The sharing would be negative as well as positive ; losses as well as 
profits would be shared between the industry and the Government, 
which would be a very effective means of reducing development risk. 
As a consequence, an increase in competition, government revenues, 
and an efficient allocation and utilization of resources could be 
expected. 5 

There are, however, several major difficulties associated with this 
system of leasing. For example, this system would necessitate the 



5 For a mathematical analysis sec: Kalter, Robert, Thomas II. Stevens and Oren A. Bloom. The Eco- 
nomics of Accelerated Outer Continental Shelf Leasing, Cornell Agricultural Economics Stall Paper, 7-1-18, 
August 1974. 



38 

institution of procedures for uniform accounting and profit determina- 
tion. In order to establish uniform accounting procedures and insure 
proper reporting of profits, a Federal regulatory agency would probably 
be necessary. In addition, the definition of profits is a very difficult 
question both economically as well as politically, and if defined incor- 
rectly incentives could result which might lead to inadequate produc- 
tion efforts. 

DECLINING ROYALTY SCHEDULE 

To discourage the early shutdowns which are inherent in a royalty 
leasing system, the Government could employ a declining royalty 
schedule. Initially the royalty rate would be high; with the passage of 
time the cost of extracting a barrel of oil would increase due to lower 
production rates, while the royalty rate would decline at a predeter- 
mined pace. Even though a declining royalty rate could alleviate some 
of the early shutdown problems, it could not completely prevent them. 
There would still be some small or marginal petroleum fields which 
would be abandoned early because of the royalty, even if the per- 
centage is reduced. These early shutdowns would adversely affect 
petroleum production and Federal revenues. 

Compared to the non-declining royalty lease, the declining royalty 
lease adds little to the sharing of risk. The firm would still be liable for 
all of the risks and co>ts inherent in the exploration, development, 
and production stages. Even though the royalty would apportion the 
market-price risk between the firm and the government, as the 
royalty declines the burden of the risk shifts back to the firm. 

In addition to these drawbacks, a royalty system imposes additional 
administrative costs for the monitoring of production and the collection 
of royalties. Furthermore, as the royalty tends to lessen the capital 
requirements of operators, participation by unqualified, marginal or 
speculative operators may be encouraged. 

PERFORMANCE SYSTEM 

The performance system of leasing OCS lands for resource develop- 
ment has been employed by other countries, most notably ( 'anada and 
Great Britain. The performance system substitutes administrative 
evaluations for the competitive market place. Under this system, the 
authorized Leasing agent specifies the amount of work to be done 4 on 
each tract, the rate at which the work is to be performed, the amount 
of capital expenditures, as well as other performance criteria. 

The primary advantage of this system is that it provides the Govern- 
ment with tight control over the development and use of it- resources. 
The government would have the authority to Bpecify the exact rate and 
e.xten t of resource development, and it could recall the lease if the firm 
fails to comply. In addition, this system could give smaller operators, 

at the discretion of the leasing authority, greater access to the 

resources. 

FIXED BONUS WITH OIL PAYMENT BIDDING 

In tins Leasing system, the fixed bonus (to be paid when the Lease is 
awarded) is specified in dollars, while the oil payment hid 1- specified 

in barrels. The oil pa\ meni could be either on the basis of the number 
of barrels to be paid each year of the Lease or on the ba>i> of a per- 



39 

centage of production. The primary advantage of this system is that 
it helps to share the market price risk of petroleum between the firm 
and the Government; changes in the market price are felt by both 
parties. 

If the oil payment is specified in terms of the number of barrels to 
be paid per year, then this system is, in effect, a rental system and 
has all of the associated problems. If, on the other hand, the payment 
is specified in terms of a percentage of production, then the system is 
a royalty system with all of its associated disadvantages. Thus, there 
are no clear advantages in having an oil-payment bidding system. 

STAGGERED BONUS BIDDING 

This system would require the bonus to be paid in several stages 
instead of all at once. This might be devised so that one-third of the 
bonus bid would be paid at the time of the sale, another one-third 
when petroleum is found in paying quantities, and the final one-third 
when production begins. Less capital would be tied up by this system 
thereby freeing more funds for exploration and development. If no 
petroleum were found, the cost to the compan}^ would be smaller and 
would therefore reduce the financial risk of OCS development. The 
disadvantage would be that it would reduce revenues to the Federal 
Government and might provide less incentive for thorough exploration 
of the tract. 

SHARE BIDDING 

This system, sometimes known as the "Phillips Plan" for the com- 
pany that proposed it, recommends the leasing of entire structures 
regardless of their size instead of the arbitrary 5700-acre tract limit 
now in effect. Companies would enter bonus bids as they do now, only 
each bid would be for the entire field and not for a specific tract. 
Each company would then receive, based on its equity, a percentage 
of the profits (or losses) from the development of the field. There 
would be a maximum of 20 percent on the participation by any one 
company in the development. A corporation would be formed with 
each participating company exercising control relative to the size of his 
bid up to the maximum of 20 percent. One operator would be desig- 
nated to develop the structure and the corporation would be billed by 
the developer, even if the operator were one of the participants in the 
corporation. This bill would be paid by drawing from a fund estab- 
lished for that purpose, possibly from bonus bids held in escrow for 
that purpose. In this way the bonus money would be used not as 
front-end money but as working capital. The major disadvantage of 
the plan is that its administrative complexity would require a very 
large Federal bureaucracy to oversee the operations of these 
corporations. 

SUMMARY OF ALTERNATIVE LEASING METHODS 

These leasing arrangements are, of course, only a few of the many 
possible alternatives. Because of the risk and uncertainty, the ad- 
vantages of bonus bidding are inconsequential. Although the bonus 
bids are held "hostage" and are development incentives, firms facing 
high risks tend to be overly conservative about the future, and 



40 

consequently they tend to under-invest in exploration and develop- 
ment. Risk decreases the supply and increases the cost of capital funds. 
This is particularly true for small companies which are unable to 
diversify their operations and thereby decrease their risk. As a conse- 
quence, small firms are at a disadvantage in this respect when competing 
with large firms — a fact that is confirmed by statistics. The higher 
the risk and more uncertain the market, the greater will be the ad- 
vantage to the larger firms under present leasing arrangements. A 
study by the Department of the Interior has shown that "Federal 
offshore areas have been explored, developed and produced primarily 
by major oil companies because the capital requirements . . . exceed 
the capabilities of most independents." 6 It can be argued that risk 
is not effectively shared between industry and Government under the 
present arrangements. On the assumption that operators tend to bear 
more than their share of risk, there is also a tendency for OCS resources 
to be underutilized. 

In a world of risk, the bonus-bidding method currently employed 
has been criticized as being the least desirable of the alternatives 
discussed on the grounds that it leads to 1) inefficient use of resources, 
2) industrial concentration, 3) reduced competition and 4) lower 
Government revenues. Royalty-bid leasing may encourage the sharing 
of some forms of risk between firms and the government and it may 
increase competition, but it also creates a problem of premature 
abandonment when production levels begin to decline and potentially 
significant production is shut-in because the cost of oil extraction is 
high relative to its value. 

Profit-sharing appears to be the most economically efficient system 
available. Because it effectively shares all forms of risk, it will tend to 
promote competition, to increase Federal revenues, and to insure 
optimal development of the resources. The major drawbacks are 
technical in nature — problems such as defining profit, cost, and 
revenue, as well as difficulty in passing the necessary legislation over 
likely industry resistance. 

A leasing arrangement is only one method of apportioning risk 
between the petroleum firm and the Government, and many other 
techniques are available. For example, the expensing of exploration 
and intangible drilling costs for tax purposes shifts an additional share 
of exploration and development risks to the Government. If it were to 
provide firms with additional data which would enable them to more 
accurately establish the tract's potential value, then another portion 
of the risk would be transferred away from the firm. The Government 
could contract with exploration companies to produce the data needed 
for tract evaluation, and then provide it (without any evaluation) to 
interested petroleum firms at a price just high enough to cover costs. 
The Government could also provide interested bidders with production 
data on nearby tracts; at present the Government does not release this 
information. Pre-bid exploration need not be limited to seismic survey- 
ing but could also include the drilling of exploratory wells. 

The present method of setting :t minimum acceptable bid in secrecy 

brings little discernible benefit, but it does contribute substantially to 



• Kash, Don K., Irvin L. Whito ot al. Energy Under The Oceans. University of Oklahoma Press, 1973; 
p. 93. 



41 

a firm's risk. If the USGS evaluation of the value of the tract is above 
the value perceived by the oil companies, then none will submit an 
acceptable bid. If the minimum acceptable bid is known in advance, 
the industry could warn the Department of the Interior that they 
believe the USGS evaluation is excessive and should be reviewed. If, 
however, the minimum acceptable bid is below what the industry 
believes to be the market value of the resource, competition will assure 
that the maximum bid will be obtained. This, of course, presupposes 
that competition exists (whether actual or potential), and that anti- 
collusive antitrust laws are enforced. With the secret minimum 
acceptable bid, even the firm that bids the highest amount is not 
assured that it will win the bid. This is costly to the winning bidder 
because of large investments in acquiring and analyzing exploration 
data. 

Other proposals to promote risk apportionment include 1) leasing 
of larger tracts, 2) exploration leases with the option to develop all 
or part of the tract, 3) checkerboard leasing, 4) additional tax pro- 
visions for exploration and development, and 5) contract exploration. 7 



7 Leland, op. cit., p. 60. 



V. Alternatives to Leasing 

The Federal Oil and Gas Corporation (as proposed in H.R. 12104, 
93d Congress) has also been suggested as a possible alternative to 
some of the problems that exist under the current leasing system. As 
stated by the sponsor of the bill, the goals of the Corporation are: l 

First, the Corporation would develop publicly owned oil and gas resources in 
order to satisfy national energy rather than to maximize private sector profits. 
Second, the Corporation would develop oil and gas rights to stimulate maximum 
economic competition in various aspects of the petroleum business. Third, the 
Corporation would provide the public and the Government with knowledge of 
the actual cost of producing oil and gas, so that appropriate public policy can be 
set to best manage the Nation's energy resources. Fourth, the Corporation 
would provide the public and the Government with accurate indications of the 
extent of our energy reserves so that any future attempts to trigger public panic 
by under-reporting available supplies could be met with reliable information. 

In addition to its charter, which would effectively grant it the power 
to operate as if it were a private firm, the Corporation would have 
some extraordinary privileges. On Federal lands the Corporation would 
have the power to explore to the extent necessary to carry out its 
authorized activities. It could request up to 50 percent of any tracts 
offered, and it would not be required to make any lease payments. 
The Corporation would receive annual appropriations from Congress 
for the first 10 years, after which it would be expected to be self- 
sufficient, Though the Corporation would be expected to pay State 
and local taxes, it would be free from any Federal income tax. The 
Corporation would also be exempted from State and local laws and 
court jurisdiction if the laws impeded its ability to operate as Con- 
gress directed. Critics of the proposal doubt that the Corporation 
could fulfill the goals set for it and that it would not be the least costly 
means of achieving these objectives. They also object to the Federal 
Government competing directly with private industry. 

Private petroleum corporations, as all other economic units, attempt 
to maximize their profits as much as existing market conditions and 
Government regulations permit. By altering the market conditions or 
Government regulations, different output mixes may be obtained. 
Theoretically, it is possible for the Government to obtain any mix 
of products it desires by changing laws and regulations. If petrol- 
eum development in a certain region is desired (or not desired) then 
that area can be offered for lease (or withheld). If a certain product 
is desired (or nor desired) the Government could stimulate (or re- 
strict) its production through appropriate tax laws and other regula- 
tions. If the Government feels that firms should make certain data 
public, then it need only pass legislation requiring such disclosure. 
Since it is not necessarily true that a Government corporation is more 
efficient than a private corporation, it is not necessarily true that the 
Government corporation can provide a product at a lower cost. 



1 Harrington, Michael. The Federal Oil and Gas Corporation. Remarks In the House. Congressional 
Record (daily ed.), March 28, 1974: II 331-2332. 

(43) 



44 

However, because of its preferential treatment (such as an exemption 
from the Federal corporate income tax) it ma} T appear that the 
Government corporation is more efficient. 

Advocates of the pioposal claim that "public ownership aimed at 
increasing competition, together with vigorous antitrust action of the 
kind formally initiated against the oil companies by the Federal Trade 
Commission * * * would protect against the effects of monopoly alto- 
gether." 2 

It has been argued, therefore, that the proposed Corporation would 
be effective in fostering competition in the petroleum industry. 
However, serious problems might arise from this situation. If the 
Corporation were to be truly competitive then it can be expected 
that all of the private firms would be eliminated from OSC develop- 
ment. Assuming that the Corporation would be at least as efficient as 
is the most efficient petroleum company, because of its tax, legal, and 
financial advantages it would be able to produce petroleum at a lower 
cost than any other firm. Consequently, if the Corporation were com- 
petitive and offered petroleum at the lowest possible price that would 
still provide a normal rate of return on capital, then it would probably 
eliminate most or all of its competitors. Rather than fostering compe- 
tition, therefore, it might well destroy it. It could, on the other hand, 
price its petroleum so that even the most inefficient firm could stay in 
business, but that action would not be consistent with the original 
purpose of the Corporation. 

A Corporation is likely to be desirable only when the market system 
cannot, or will not, appropriately incorporate the desires of the society 
it serves. For example, this may occur when the production or dis- 
tribution of a particular product is controlled by a single firm or by a 
few collusive firms (monopoly or oligopoly). It also may occur when 
the political or social desires of a society are not the same as those 
expressed by the consumers through the market. For example, it may 
be politically or strategically prudent to restrict or cut off petroleum 
imports but not economically desirable to do so. 

- M. Harrington, op. cit., p. II 2332. 



VI. Conclusion 

It is apparent that after nearly a quarter of a century, the policy 
of leasing Federal oil and gas on the OCS needs a thorough review. 
In the re-evaluation of national energy goals that has been precipitated 
by a series of "energy crises," this policy must be given priority 
consideration because OCS petroleum represents one of the few 
remaining domestic sources of energy for the United States. The present 
system has proven useful but has deficiencies that are considered by 
many to be counterproductive. There can be little doubt that the 
present system can be improved, even if the modifications are not as 
sweeping as some have suggested. The present system should be 
compared to the alternatives, as outlined in this report, and the best 
features taken from each to the extent that they are compatible and 
with the objective of encouraging exploration and development, 
improving competition, and reducing the associated environmental 
hazards. A revised leasing policy, incorporating these elements, 
would be a major contribution toward the establishment of a national 
energy policy. 

(45) 



APPENDIX 



Offshore Oil: Selected References 1969-75 



63-732 O - 76 - 6 



OFFSHORE OIL: SELECTED REFERENCES 1969-1975 

Aagaard, P. M. Besse, C. P. 

A review of the offshore environment — 25 years of 
progress. Journal of petroleum technoloqy, v. 25, Dec. 1973: 
1355-1360. 

"Offshore operations began in earnest only about 25 years 
ago. The authors review developments to date, discussing such 
aspects as wave heights, wave forces, piling capacity, soil 
problems, arctic ice forces, and protection of the environment, 



Adams, Matthew T. 

O.S. tax aspects of seabed operations: Internal Revenue 
Code Section 638 in perspective. Law S policy in international 
business, v. 2, summer 1970: 443-478. 



Aitkens, Arthur. 

The new outer continental shelf operations and leasing 
regulations and oil and gas lease form. Natural resources 
lawyer, v. 3, May 1970: 298-314. 

"On August 22, 1969, new regulations governing oil and gas 
operations and leasing in the entire Onited States outer 
continental shelf were issued by the Department of the Interior 
and published that same date in volume 34, no. 161, of the 
FEDERAL REGISTER." 



Allen, Alan A. Schlueter, Roger S. Mikolaj, Paul G. 

Natural oil seepage of Coal Oil Point, Santa Barbara, 
California. Science, v. 170, Nov. 27, 1970: 975-977. 

"Aerial, surface, and underwater investigations reveal 
that natural seeps off Coal Oil Point, California, introduce 
about 50 to 70 barrels (approximately 8,000 to 11,000 liters) 
of oil per day into the Santa Barbara Channel. The resulting 
slicks are several hundred meters wide... tarry masses within 
these slicks frequently wash ashore." 



Bakke, Donald R. 

Soviet Onion won't even concede that Mainland China has 
huge offshore oil. Offshore, v. 3U, Sept. 197U: 6U-65. 



Baldwin, Alan. Cowell, Eric. 

Protecting the North Sea environment. New scientist, v, 
63, Sept. 26, 1974: 792-794. 

."Development of the North Sea's oil reserves is as much 
environmental problem as an engineering one. Environmental 
protection techrology now costs the oil industry more than 5 
per cent of the capital it invests." 



(49) 






50 



Baldwin, Malcolm F. 

Public policy on oil--an ecological perspective. Ecology 
law guarterly, v. 1 , spring 1971: 2U5-303. 

"In this article, Malcolm Baldwin of the Conservation 
Foundation, attempts to show that environmental problems caused 
by petroleum and its ultimate scarcity are far more complex 
than most of us realize. The oil policy of the United States 
has not reflected the ecological ramifications of oil 
production and consumption. Furthermore, the governmental 
decision-makers do not presently have sufficient information to 
make sound environmental policies concerning oil." 



Ealdwin, Malcolm F. 

The Santa Barbara oil spill. University of Colorado law 
review, v. U2, May 1970: 33-76. 

Content s. --Before and after the spill, a brief chronology. 
-The spill--magnitude, effects, cleanup. --Santa Barbara 
setting. — Pressures for and against leasing — the Budget Bureau, 
the oil companies, public opposition. --Federal statutes, 
procedures and agencies involved in offshore leasing decisions. 
Who protects the public? After the spill. Legal actions and 
suits pending. 



Ball, Fldon. 

Gulf of Mexico: after 25 years drillers are still learning 
how to cope with the Gulf. Offshore, v. 32, Feb. 1972: 35-UO, 
U2, UU, U7. 

"The Gulf of Mexico has beccme, among other things, the 
leader of offshore oil. It leads the world in exploration, 
development drilling and production. Among offshore areas it 
boasts an impressive list of superlatives--most oil and gas 
wells completed, most fields discovered, most platforms 
installed, most oil produced, most gas produced, most dry 
holes, most acres refused as worthless, most tracts returned as 
ur. productive. " 



Battelle Memorial Institute, Columbus, Ohio. Pacific Northwest 
Laboratory, Fichland, Wash. 

Review of Santa Barbara Channel oil pollution incident to 
Department of Interior, Federal Water Pollution Control 
Administration and Department of Transportation, United States 
Coast Guard, Washington, D.C. Fichland f available from NTIS, 
1 ° 6 9 1 1 v. (various pagings) . 

"PB 191 712" 

At head of title: Pesearch report. 



Bendiner, Robert. 

Taking oil off the shelf. New York times magazine, June 
29, 1975: 12-1U, 16, 18, 20. 

Examines the social and environmental changes occurring 
wVen offshore drilling takes place. 



51 



Bentsen, Lloyd. 

Is production sharing ahead for O.S. offshore operations; 
an interview. World oil, v. 178, Feb. 1 , 1974: 23-26. 

"Sen. Lloyd Bentsen thinks so. The senator explains his 
recent proposals to increase government revenues from federal 
lands and eliminate percentage depletion on domestic company 
operations outside North America." 



Berardeli, Phil. 

East coast states ask leasing ban. Offshore, v. 31, Dec. 
1971: 77, 79-80. 

Describes efforts currently in progress by Atlantic 
coastline states to ban the leasing of offshore lands on the 
Atlantic outer continental shelf for oil exploration. 



Berkson, Harold. 

Marine sanctuaries in California. Prepared at the request 
of Henry H. Jackson, Chairman, Committee on Interior and 
Insular Affairs, United States Senate, pursuant to S. Pes. 45 — 
A National Fuels and Energy Policy Study. Washington, O.S. 
Govt. Print. Off., 1972. 21 p. 

"Serial no. 92-25" 



Bernstein, Peter J. 

Atlantic offshore oil: preparing to take the plunge. 
Nation, v. 217, Sept. 10, 1973: 203-207. 

Notes that far-reaching commercial exploitation of coastal 
waters is at hand. Questions promoting offshore drilling to 
solve the fuel crisis before additional exploration of the 
structure of the ocean floor, movement of sediment, erosion, 
bottom life, and the ocean's capacity to assimilate wastes. 



Bibliography of marine affairs, II; D: mineral resources 
of the sea. Ocean management, v. 2, Apr. 1975: 267-280. 



Bleakley, W. B. 

OCS orders 8* and 9 — producers discuss benefits, costs, and 
problems. Oil S gas journal, v. 70, Aug. 21, 1972: 59-66. 

"There is no guarrel with the aims of the regulations. 
Offshore operators claim, however, that the same ends could 
have been achieved with less regulation and at less cost." 



52 



Eowring, Philip. 

Malaysia's Petronas: a legislative overkill. Par Eastern 
economic review, v. 88, Hay 16, 1975: 63-66. 

"The Government has effectively given Malaysia's infant 
State-owned oil enterprise the power to nationalise companies 
marketing and processing petrol and petrochemicals. The move 
has already drawn criticism, and could upset the climate for 
foreign investment." 



Canada. Dest. of Energy, Mines and Resources. Resource 
Administration Division. 

Offshore exploration; information and procedures. Ottawa, 
1970. 21 p. 

"...to outline the responsibilities and reguirements of 
Federal agencies concerned with the offshore for operating 
companies who may be familiar with them; to note some of the 
services available through these agencies; and, to list the 
persons who mav be contacted for assistance." 



Canada. DeDt. of Energy, Mines and Resources. Resource 
Management and Conservation Branch. 

Offshore exploration: information and procedures for 
offshore operators. Ottawa, 1973. 66 p. 



Canada's "frontier" search. Petroleum press service, v. 
U0, July 1973: 2U6-249. 

Exploration interest is now concentrated on Canada's 
"frontier" regions — the Mackenzie Delta and Arctic Islands in 
the far north and the Atlantic offshore shelf in the east. 
Malor reserves of natural gas have been established in the 
first two areas and oil discoveries are north lacking. 



Canfield, Monte, Jr. 

Oil and gas leasing of the outer continental shelf. GAO 
review, v. 10, spring 1975: 33-40. 

Views the issue of leasing the outer continental shelf 
from the standpoint of how we, as a nation, can balance our 
supply and demand for energy at minimum cost in dollars and at 
minimum cost to the environment. 



Carmichael, Jim. 

March offering of Louisiana blocks becomes landmark sale. 
Offshore, v. 3U, May 197U: 71-79. 

Reviews the leases on tracts offered and sold in the area 
offshore Louisiana in March 197U. 



53 



Chernov, Ron. 

The new sheikdom off the Jersey shore. Philadelphia, v. 
66, June 1975: 162-164, 166-176, 178. 

Article discusses desire of American oil industry to 
obtain the offshore oil of the East Coast and to build a 
superport in Delaware Bay. Views of environmentalists are also 
included. 

Chilton, J.R., and others. 

Arctic Islands development may require $8 billion. Rorld 
oil, v. 174, May 1972: 118-119. 

"The Arctic Islands of northern Canada contain more 250 
ma-jor geologic structures and boast an attractive wildcat 
success ratio. But if gas and oil production is to be moved to 
Canadian and U.S. markets to the south, the reguired investment 
will severely strain industry financial resources." 

Conservative Party (Gt. Brit.) . Research Dept. 

Energy. [London, Conservative Central office] 1975. 17- 
32 p. (Notes on current politics, no. 2) 

Partial contents. — Energy conservation. — Development of 
offshore oil. — Other sources of energy .--Energy supplies in the 
future. 



Corrigan, Richard. 

Demand for more oil and gas prompts review of offshore 
leasing. National -journal, v. 4, July 8, 1972: 1109-1116.' 

The leasing system for OCS lands is only one item in the 
administration's current study of policies affecting energy 
development. The OCS study is concerned with prospects for 
expanding the acreage and speeding the pace of offshore 
leasing, including the system by which these lands are leased. 



Coulter, Raymond C. 

The Outer Continental Shelf Lands Act — its adequacies and 
limitations. Natural resources lawyer, v. 4, Nov. 1971: 725- 
731. 



Crommelin, Michael. 

Offshore oil and gas rights: a comparative study. Natural 
resources -journal, v. .14, Oct. 1974: 457-500. 

Article considers the offshore oil and gas regimes of four 
countries: the U.S., the Onited Kingdom, Canada, and Australia. 



54 



Curlin, James W. 

Outer continental shelf oil and gas leasing off southern 
California: analysis of issues. Prepared at the reguest of 
Hon. Warren G. Magnuson, chairman, for the use of the Committee 
on Commerce, pursuant to S. Pes. 222, National Ocean Policy 
Study. Washington, U.S. Govt. Print. Off., 197U. 100 p. 

At head of title: 93d Cong., 2d sess. Committee print. 



Dam, Kenneth W. 

The evolution of North Sea licensing policy in Britain and 
Norway. Journal of law & economics, v. 17, Oct. 197U: 213-263. 

Focuses on the economic dimensions of licensing policy. 
Discusses the 1971 auction experiment, the effect of the 1968 
aas contracts on subseguent exploration, the Norwegian system 
on which British participation proposals were patterned, and 
the economic and financial effects of various technigues for 
capturing the economic rent where licenses are issued under a 
discretionary system. 



Deans, Palph C. 

Offshore oil search. [Washington] Editorial Research 
Peports, 1973. 539-536 p. (Editorial research reports, v. 2, 
1973, no. 3) 

Content s. --New interest in offshore drilling. -- 
Jurisdiction over seabed development. --Concerns over energy and 
pollution. 



Devanney, John w.. III. 

Key issues in offshore oil. Technology review, v. 76, 
Jan. 1974: 20-25. 

"The development of offshore oil resources is enmeshed in 
technological uncertainties and policy contradictions. But my 
anv rationale, exploitation of these resources must be 
profitable both for their developers and for the nation." 



Dillin, John. 

Offshore oil: America's trillion -dollar decision. 
Christian Science monitor, Apr. 15, 197U, p. 1, FU; Apr. 16, 
F6; Apr. M, p. F5; Apr. 18, p. 7; Apr. 19, p. F1. 

A series of five articles on the future of offshore oil 
drilling in the United States. 



Doumari, George A. Dyas, Norma W. 

Development of oil and gas on the continental shelf; 
report to the Ccmmittee on Commerce, United States Senate, 
pursuant to S. Pes. 222; national ocean policy study. 
Washington, O.S. Govt. Print. Off., 197U. 12 p. 

At head of title: 93d Cong. , 2d sess. Senate. Committee 
print . 



55 



Drew, Jean Talley. 

Continental shelf law: outdistanced by science and 
technology. Louisiana law review, v. 31, Dec. 1970: 108-120. 

Discusses the United Nations Convention on the Continental 
Shelf and recommends amendments to the Outer Continental Shelf 
Lands Act to assure the United States maximum utilization of 
the shelf with the minimum of friction with other nations. 



Drilling technology keeps pace with deep water. Offshore, 
v. 35, June 5, 1975: U6-U7, U9-60. 

Article discusses offshore oil drilling developments and 
includes a complete list of all wells drilled in waters beyond 
the 600 ft. mark. 



Edsall, Thomas B. 

State not ready for onshore upheaval an offshore oil 
strike would bring. In Extensions of remarks of Robert E. 
Bauman. Congressional record [daily ed. ] v. 121, Feb. 13, 
1975: E525-E528. 

Writes about the problems that Atlantic Coastal states 
would face if there is an offshore oil strike. 



Emery, K. 0. Ochupi, Elazar. 

Caribe's oil potential is boundless. Oil G gas journal, 
v. 70, Dec. 11, 1972: 156, 158, 160, 162. 

"Host favorable areas for oil can be identified along the 
coast and in the waters of the Gulf of Mexico and Caribe." 



Emery, K. O. 

Latitudinal aspects of the law of the sea and of petroleum 
production. Ocean development and international law journal, 
v. 2, summer 197U: 137-149. 

Points out the variation with latitude of the areas of 
continents and of the ocean-floor subdivisions that have been 
proposed. Includes diagrams of interest to those concerned 
with the potential ocean-floor revenues and their disposition. 



Emery, K. 0. 

Provinces of promise. Oceans, v. 17, summer 197U: 15-19 
Speculates on the magnitude and location of oil and gas 

reserves in offshore locations worldwide. 



Emery, Kenneth 0. 

Hew opportunities for offshore petroleum exploration. 
Technology review, v. 77, Mar. -Apr. 1975: 30-33. 

"The continental shelves, marginal basins, and continental 
rises may hold generous petroleum resources. Their exploration 
will depend as much on political as on technological genius." 



56 



Energy crisis focuses on Gulf. South magazine, v. 1, 
winter 1974: 6-10. 

"The Gulf is the scene of two controversial efforts — 
buildinqs of a Superport(s) for foreign oil unloading and 
expansion of offshore drillings." 



Energy Supply Act of 1974. [Debate and vote in the 
Senate! Congressional record [daily ed. ] v. 120, Sept. 18 r 
197U: S1692U-S16993. 



Environmental control: environmental impact statements 
must include discussion of alternatives beyond scope of 
authority of reporting body. Minnesota law review, v. 57, Jan. 
1973: 632-638. 

Defendant Sec. of the Interior proposed to sell oil and 
natural gas leases in the Gulf of Mexico. In Natural Resources 
Defense Council v. Morton, U58F.2d827 (D.C. Cir. 1972), the 
Court of Appeals held that the environmental impact statement 
required by NEPA must consider the conseguences of all 
alternatives currently practiced in sufficient detail to make a 
reasonable choice possible. 

A case note. 



Feller, Peter Buck. 

O.S. customs aspects of seabed operations. Law and policy 
in international business, v. 2, summer 1970: U02-1U2. 



Pinlay, Luke W. 

Fiqhts of coastal nations to the continental margins. 
Natural resources lawyer, v. 4, July 1971: 668-675. 

Orges modification of international law of the sea to 
allow for maximum advantage to O.S. petroleum interests. 



Gardner, Frank J., and others. 

Offshore exploration. Oil 6 gas journal, v. 71, Dec. 10, 
1973: 77-83, 86-88, 90, 92. 

Partial contents. — North Sea today: where tomorrow?-- 
Attaka still largest Indonesia offshore field. — St. Lawrence 
Gulf--an offshore promise. 



Griswold, Lawrence. 

North Sea oil: NATO^s refuge or ruin? Air Force magazine, 
v. 58, Feb. 1975: U9-5U. 

Discusses the economic and strategic significance of North 
Sea petroleum and also possible oil and gas finds in the 
Svalbard/Barents Sea area. Questions policies being pursued by 
Norway and England. Says the situation may be a bigger 
temptation to military solutions than the Middle East. 



57 



Guttentag, Joseph H. Wilson, Michael G. 

The continental shelf and foreign tax credit under the Tax 

Reform Act of 1969. Wayne law review, v. 16 r fall 1970: 1379- 
1403. 



Hall, William. 

The coming crisis in North Sea finance. Banker, v. 125, 
Feb. 1975: 125-130. 

"...shows how finance for the development of many North 
Sea oil fields has dried up, why this has happened, and how 
Government policy must change if Britain is to have any change 
of attaining self-sufficiency in oil by the early 1980s." 



Hammett, Dillard. 

Two primary problems face the offshore — men and money and 
material shortages. Offshore, v. 35, Feb. 1975: 110-112, 114, 
117-118, 120, 122. 

Defines the capital items, the services, and the 
consumables used in offshore drilling. Says two primary 
problems are money and people. 



Heise, Horst. 

Canada* s first offshore oil — what now? Oil S gas journal, 
v. 69, Dec. 13, 1971: 108, 110, 112, 114, 119-120. 

Describes efforts to develop Canada*s offshore oil 
industry and presents an estimate of that industry 1 s potential. 



Henri, William F. 

The Atlantic states* claim to offshore oil rights: United 
States v. Maine. Environmental affairs, v. 2, spring 1973: 827- 
839. 

"The original thirteen colonies are claiming for 
themselves the right to ownership and control of the seabed and 
subsoil of the Atlantic Coast in excess of three geographic 
miles from their coast lines. These claims are based on grants 
from the British Crown to the colonies in the colonial 
charters. The federal government, on the other hand, claims 
ownership of this area on the basis of the Submerged Lands Act." 



Hooper, Mark W. 

Sound waste management cuts offshore costs. World oil, 
175, Sept. 1972: 41-44. 

"Offshore operators now must comply with a multitude of 
contradictory and confusing pollution regulations issued 
hastily by a variety of government agencies. Here*s how to 
satisfy these generally unnecessary reguirements at minimum 
expense. " 



58 



Horigan, James E. 

Unitization of petroleum reservoirs extending across sub- 
sea boundary lines of bordering states in the North Sea. 
Natural resources lawyer, v. 7, winter 1974: 67-76. 



Indian Ocean, a closer look: a new day may be drawing for 
the Indian Ocean. Offshore, v. 35, Apr. 1975: 117-134. 

"...to point out that the Indian Ocean has a certain 
potential as an exploration area. It has good geology. It 
already has a taste of oil. Coastal nations seem willing, 
perhaps even eager, to encourage largescale exploratory 
drilling. " 



Interior will offer 2.3 million acres in the Gulf of 
Mexico. Offshore, v. 3U, Mar. 1974: 31-34. 

Discusses and presents a map of oil and gas lands off the 
coast of Louisiana, soon (March and September, 1974) to be 
opened for bidding. 



Janos, Leo. 

Offshore. Atlantic, v. 230, Aug. 1972: 74-79. 

"Of oil rig drillers, roustabouts, and roughnecks, and 
life that resembles a cross between the Navy and a penal 
colony. " 



Jenninqs, R. Y. 

The limits of Continental Shelf jurisdiction: some 
possible implications of the North Sea case judgment. 
International and comparative law guarterly, v. 18, Oct. 1969 
819-832. 



Johnston, Lowell P. 

The high cost of offshore oil. Offshore oil, v. 1, Jan 
1975: 20-24. 

"Oil and water have never mixed easily. Now North Sea 
drillers and producers are finding new dimensions of the 
problem. " 



Joseph, William. 

Offshore petroleum: where the industry is headed. Onder 
sea technology, v. 11, Sept. 1970: 22-25, 36, 38. 

Following the Santa Barbara disaster, the petroleum 
industry has been attempting to improve drilling and 
transportation methods. 



59 



Kalman, Paul. 

Oil S water: can they mix? Field 6 stream, v. 79, Mar. 
1975: 55, 149-150, 152, 154-156. 

"Despite raging fires and sukseguent oil spills off the 
Louisiana coast, the expected damage to marine life never 
materialized. Today, the fishing around oil rigs is excellent, 



Kamer, Hansrudclf. 

Norway and the USSR sguare off in the Arctic. Swiss 
review of world affairs, v. 24, Oct. 1974: 4-7. 

Background on the Norwegian-Soviet rift over the 
potentially resource-rich continental shelf in the Barents Sea 
off Spitsbergen. 



Kennedy, John L. 

Despite success, S.E. Asia oil hunt just started: a 
special report. Oil and gas journal, v. 73, Bar. 3, 1975: 69- 
76, 93-100, 105-106, 108, 110, 112. 

"...most countries in Southeast Asia are still in the 
early stages of exploration and it makes the area one with 
heavy emphasis still on exploration and development." 



Knight, H. Gary. 

Shipping safety fairways: conflict amelioration in the 
Gulf of Mexico. Journal of maritime law and commerce, v. 1, 
Oct. 1969: 1-20. 

"It is the purpose of this article to examine the conflict 
of interest which arose between the shipping industry and the 
offshore mineral industry in the Gulf of Mexico, and the use of 
shipping safety fairways as an attempt to ameliorate the 
adverse effects of that conflict." 



Krueger, Robert B. 

The background of the doctrine of the continental shelf 
and the Outer Continental Shelf Lands Act. Natural resources 
journal, v. 10, July 1970: 442-494. 



Lewis, Austin R. 

A capsule history and the present status of the tidelands 
controversy. Natural resources lawyer, v. 3, Nov. 1970: 620- 
636. 

A brief discussion of the ownership and control of 
offshore submerged lands is followed with a discussion of the 
administrative actions and judicial rulings that followed the 
passage of the Submerged Lands Act and the Outer Continental 
Shelf Lands Act. 



60 



Levis, Austin w. 

Offshore boundary and title issues. Natural resources 
lawyer, v. U, Nov. 1971: 737-7U6. 

Sketches the history of the tidelands controversy state by 
state. 



Lineup of top oil and gas producers in Gulf of Mexico. 
Offshore, v. 32, Sept. 1972: 52-5U. 

"The Gulf of Hexico, site of the world's first well out of 
siaht from land, is still a strong producer after 25 years. As 
a producer of both oil and gas, the Gulf of Hexico produces a 
malority of O.S. domestic offshore hydrocarbon energy and will 
probably continue to do so for a number of years." 



Londenberg, Ronald. 

Man, oil and the sea. Offshore, v. 32, Oct. 1972: 5U-56, 
59-60, 62, 6U, 66, 71-72, 75-76, 79. 

Traces the history of the offshore petroleum industry, on 
the occasion of the industry's 25th anniversary. 



Longworth, Richard C. 

The North Sea oil rush is on but Britain and Norway's 
European neighbors shouldn't count on an energy bonanza. 
European Community, no. 185, Apr. 1975: 3-6. 

The first North Sea oil field is soon scheduled to go into 
full production. Takes a look at what this means for Britain 
and Norway and for Europe as a whole. 



The Looming oil battle off the East Coast. Business week, 
no. 2328, Apr. 27, 1974: 80, 83-84. 

Comments on the findings of the President's Council on 
Environmental Quality in its report on oil and gas exploration 
in the Atlantic and the Gulf of Alaska. 



Louisiana Offshore Oil Scouts Association. 

Status of the Louisiana offshore oil industry as of 
January 1, 1S73; statistical review of events between July 1, 
1972 and January 1, 1973. fn.p., 1973] 1 v. (various pagings) 



HacDor.ald, Ross. Easton, Robert. 

Santa Barbarans cite an 11th commandment: 'thou shalt not 
abuse the earth.* New York times magazine, Oct 12, 1969: 32- 
33, 1U2-149, 151, 156. 

Discusses the oil spill on the Continental Shelf off Santa 
Barbara earlier this year, including environmental aspects. 



61 



Hacleod, Greig. Boardman, Bobert. 

Nationalism comes of age with discovery of North Sea oil. 
International perspectives, Mar. -Apr. 1975: 36-39. 

"The existence of large, exploitable resources off the 
Scottish coast has now lent credibility to the argument of the 
Scottish National Party that an independent Scotland would be 
economically viable." 



Hagida, Arthur J. 

Coastal states seek changes in OCS leasing policy. 
National journal reports, v. 7, Feb. 15, 1975: 229-239. 

"Coastal states are exploring a variety of methods to 
revise the federal governments* s policies of leasing underwater 
areas along the Outer Continental Shelf for oil and natural gas 
exploration." 



Massachusetts Institute of Technology. Offshore Oil Task Group, 

The Georges Bank petroleum study: volume I, impact on New 
England real income of hypothetical regional petroleum 
development. [Cambridge, Mass. ] 1973. 284 p. (Massachusetts 
Institute of Technology. Beport no. MITSG 73-5) 

"This study is an attempt to aid New England^ decision- 
makers in determining what should be the region 1 s response to 
the possibility of a petroleum discovery on the New England 
continental shelf through the application of some very specific 
guantitative technigues to some of the issues raised by this 
possibility. " 



Massachusetts Institute of Technology. Sea Grant Project 
Office. Offshore Oil Task Group. 

The Georges Bank petroleum study: summary. [Cambridge, 
1973] 8U p. (Massachusetts Institute of Technology. Sea 
Grant Project Office. MITSG 73-5) 

Summarizes the findings of the study, which investigated 
"the regional implications of petroleum developments on the New 
England continental shelf." 



Massachusetts Institute of Technology. Sea Grant Project 
Office. Offshore Oil Task Group. 

The Georges Bank petroleum study, volume II: impact on New 
England environmental guality of hypothetical regional 
petroleum developments. [Cambridge, 1973] 311 p. 
(Massachusetts Institute of Technology. Sea Grant Project 
Office. Report no. MITSG 73-5) 

Examines the possible "changes in water and air guality 
effected bv opting for one development hypothesis rather than 
another and the presently identifiable effects these changes 
will have on the biota." Gives special attention to the 
possibility of oil spills. 



62 



Matthews, Charles D. 

Let's put oil-spill risks in perspective. Oil S gas 
journal, v. 72, Sept. 9, 197U: €5-67. 

Attempts to put into perspective the risks of crude oil 
coming onshore if spilled from an offshore platform near the 
East coast. The president of National Ocean Industries 
Association urges reason in making offshore policies. 



Mattson, Hedv. 

Georges Bank under scrutiny. NOAA [National Oceanic and 
Atmospheric Administration] v. 3, July 1973: U-9. 

The New England Regional Commission and New England Rivers 
Basins Commission solicited the help of the Massachusetts 
Institute of Technology to study the implications of an oil 
find in the Georges Bank area (also a famous fishing grounds) 
or. regional income and environmental guality. 



Havne, W. Harrv. 

Marine seismic energy sources: a status report. Undersea 
technology and oceanology international offshore technology, v. 
13, Aug. 1972: 2U-27. 

"...reviews the types of energy sources available for full- 
scale oil and gas exploration in the marine environment. 
Included is a discussion of the unwanted secondary energy 
pulses generated underwater..." 



HcKelvey, V. E. 

Environmental protection in offshore petroleum operations. 
Ocear. management, v. 1, Mar. 1973: 119-128. 

Discusses DSGS safety systems for offshore drilling and 
pumping. 

HcKelvey, V. E. 

Prospects and problems of OCS development. American Gas 
Association monthlv, v. 55, Nov. 1973: 7-11. 

"A geological review and an estimation of petroleum 
potential along the United States Outer Continental Shelf." 

McNabb, Dan. 

Bidders snub most deepwater tracts. Oil and gas journal, 
v. 72, Apr. 8, 197U: 36-40. 

"Operators commit a record $2,176 billion in Offshore 
Louisiana lease sale — mostly for geologically attractive close- 
in tracts. Top tract wert for $168,861,000, and Exxon was big 
spender--$2U5,011,600 on six tracts." 



63 



Win, T«ang. 

Exploration for offshore oil in Asia. Issues & studies, 
v. 10, Dec. 1974: 32-44. 

Describes current operations in offshore drilling in the 
South China Sea and in East Asia. 



Miron, George. 

The outer continental shelf — managing (or mismanaging) its 
resources. Journal of maritime law and commerce, v. 2, Jan. 
1971: 267-288. 

"The resources of the outer continental shelf of the 
United States must be managed so as to protect the environment. 
That objective cannot be achieved unless the Department of the 
Interior recognizes the right of the public to participate 
meaningfully in proceedings to determine whether exploration 
permits should be issued and obtains data on explored tracts 
before they are leased. If the interests of consumers and 
taxpayers are to be served, and national productivity improved, 
the leasing strategy of the Department of the Interior must be 
changed; the 'tacit working agreement 1 for imposition of state 
market-demand prorationing should be abandoned..." 



Mitchell, John G. 

The selling of the shelf. Audubon, v. 77, May 1975: 44-63, 
Notes that the real guestion is when and where and under 

what conditions we shall drill for new oil and gas offshore. 

Questions the rush to develop offshore oil, the role of oil 

companies and the Interior Department. Feels the environmental 

impact statement was inadeguate. 



Molotch, Harvey. 

Santa Barbara: oil in the velvet playground. Ramparts, v, 
8, Nov. 1969: 43-51. 

The oil spill that erupted in the Santa Barbara Channel 
last January.. ."provided Santa Barbarans with sharp insights 
into the way our society is governed and into the power 
relationships that dictate its functions." 



Moreland, Douglas H. 

Pecovery for injuries or death on offshore drilling 
platforms: a problem of applicable law under the Lands Act. 
Oregon law review, v. 51, summer 1972: 813-825. 

Comment holds that solving the problems involved in 
wrongful death and personal injury recoveries on the outer 
continental shelf reguires legislative revision of section 4 of 
the Outer Continental Shelf Lands Act. 



64 



National Academy of Enqineering. Panel on Operational Safety 
in Offshore Resource Development. 

Outer continental shelf resource development safety: a 
review of technology and regulation for the systematic 
minimization of environmental intrusion from petroleum 
products. [Washington, available from NTIS] 1972. 197 p. 

"PB-215 629" 

"The subiect of offshore oil resource development safety 
is considered from the standpoint of minimizing the potential 
for sudden massive and small continued releases of oil to the 
environment. " 



National Petroleum Council. Committee on Ocean Petroleum 
Pesources. 

Ocean petroleum resources; an interim report. 
f Washington] 1974. 39 p. 



National Petroleum Council. Committee on Petroleum Resources 
Order the Ocean Floor. 

Law of the sea: particular aspects affecting the petroleum 
industry. \ Washington? ] 1973. 90 p. 



Noone, James A. 

{"Leasing of the outer continental shelf] National journal 
reports, v. 6, Apr. 6, 1974: 512-521; Apr. 20: 592-598. 

Two reports on Federal plans to lease OCS land for oil and 
gas exploration; the first "analyzes environmental aspects of 
the expansion program, which would result in a 10-fold increase 
of the current leasing effort." The second "discusses other 
facets of the program, including the government's OCS 
manaqement practices and response to the expansion plan by the 
oil industry." 



North Sea action takes lead from Gulf of Mexico. 
Offshore, v. 32, Nov. 1972: 33-37. 

The North Sea is being developed much faster than has any 
other part of the world. Explains how the British Government 
encouraged maximum development in minimum time and kept 
qovernmental policy and interference in the petroleum industry 
or. a low profile. 



Off-shore oil drillinq: a question of pace. Congressional 
quarterly weekly report, v. 32, July 27, 1974: 1967-1970. 

"The debate over the new off-shore areas does not focus on 
whether they should be developed at all, but only how fast." 



65 



Offshore oil and gas production: annual review. Offshore, 
v. 33, June 20 r 1973: 84-198. 

Contents. — Western Hemisphere — Gulf of Mexico, offshore 
Louisiana, U.S. West coast, Latin America, Canada. — Eastern 
Hemisphere — Africa, Australia, Middle East, Mediterranean, 
Mainland China, North Sea, Scotland, England, Southeast Asia, 
Pussia. 



Offshore oil: Western Europe and Southeast Asia. 
Offshore, v. 35, Feb. 1975: 64A, 64D, 65-76, 79-80, 85-86, 88, 
90-91, 93-94, 97, 99-100. 

Partial contents. — Southeast Asia is no sleeping giant. — 
Everyone works to bring North Sea into production. — Energy 
policymakers influence the North Sea. — Oil affects Norway^s 
policy: Norwegian policy affects oil. 



Oklahoma. University. Science and Public Policy Program. 
Technology Assessment Group. 

Energy under the oceans: a technology assessment of outer 
continental shelf oil and gas operations. [ 1st ed. Norman, 
University of Oklahoma Press, 1973] 378 p. 



Oklahoma. University. Science and Public Policy Program. 
Technology Assessment Group. 

Energy under the oceans: a summary report of a technology 
assessment of OCS oil and gas operations. [1st ed. Norman, 
University of Oklahoma Press, 1973] 31 p. 

"The complete report. Energy Under the Oceans: A 
Technology Assessment of Outer Continental Shelf Oil and Gas 
Operations, was published by the University of Oklahoma Press 
in September, 1973." 



Petersen, Erik. 

Canadians strong in North Sea. Oilweek, v. 26, Apr. 7 1975: 
12-13, 15-16, 18, 20, 24, 30, 35, 37-38. * 

"More than 50 Canadian companies are participating in the 
exploration play in the North Sea and off the UK west coast. 
Exploration editor. . .highlights major current and future 
activity in this exciting petroleum search." 



Petersen, Erik V. 

New offshore plays developing. Oilweek, v. 26, May 19, 
1975: 12-14, 16, 24, 28, 30, 36, 39-40, 42, 47. 

"The Labrador Sea, the Beaufort Sea and high Arctic waters 
hold the spotlight in Canada's offshore exploration." 



66 



Peterson, Bussell. 

CEQ's Peterson takes on industry. Environmental action, 
v. 5, Apr. 13, 197U: 3-7. 

"Delaware's ex-governor fights to protect its coast." 



Pimlott, Douglas H. 

The arctic offshore gamble. Living wilderness, v. 38, 
autumn 1974: 16-25. 

"The limited scientific knowledge about the arctic marine 
environment and the possibly high vulnerability of that 
environment to pollution gives special interest to offshore 
drilling activities in arctic Canada." 



The Politics behind the new oil hunt. Business week, no. 
2166, Bar. 6, 1971: 10U-106. 

A brief discussion indicating that the oil companies are 
making an intense search for oil in Africa, Latin America, 
Indonesia, South China Sea off South Vietnam, Alaska and Canada 
to provide leverage for bargaining with diddle Eastern 
countries. 



The Promise from the deep. Bouston, v. U5, Hay 197U: 18- 
19, 22, 59-62. 

"As onshore production continues to dwindle, offshore oil 
offers the best change for the U.S. to lessen its dependence on 
foreign petroleum supplies." 



Public participation in rulemaking procedures under the 
Outer Continental Shelf Lands Act. Iowa law review, v. 56, 
Feb. 1971: 696-7C6. 

"The OCSLA grants exclusive jurisdiction over the issuance 
of mineral leases on the outer continental shelf (OCS) to the 
Federal Government. The administration of all OCS leases is 
the responsibility of the Secretary of the Interior." 
Discussion considers the legal status and desirability of 
public participation in the promulgation of rules issued 
pursuant to the OCSLA. 



Quintrelle, Nixon. 

Offshore gains take sting frcm onshore loss. Offshore, v, 
32, Sept. 1972: 29-33. 

"Domestic offshore production makes fat gain to offset 
dwindling onshore flow. An exclusive study, by company, of 
what's now being produced." 



67 



Feid, Alastair. 

Letter from Scotland. New Yorker, v. 50, Oct. 7, 197U: 
76, 81-83, 86, 88, 93-94, 96, 98, 100, 104, 106, 108-112, 117. 

Peports on the conflict in Scotland over oil off 
Scotland* s coast, with elements of conservation and Scottish 
nationalism involved. 



Pintoul, Bill. 

Alaska hears sounds of forthcoming boom. Offshore, v. 34, 
Sept. 1974: 67-70. 

"Alaska is on the threshold of an exploration era 
unprecedented in the state's oil history." "Not surprisingly, 
the greatest concentration of geophysical activity is in the 
Gulf of Alaska..." 



Fintoul, Bill. 

Offshore California begins to stir with plans to resume 
new drilling. Offshore, v. 33, Sept. 1973: 40-41. 

"Adeguate safeguards against oil spills are now available, 
industry tells state and Federal regulators in effort to lift 
bans." 



Fogers, William B. Fakundiny, Fobert H. Kreidler, W. Lynn. 

Petroleum exploration offshore from New York. Albany, 
University of the State of New York, State Education Dept., 
1973. 25 p. (New York (State). State Museum and Science 
Service. Circular 46) 

Evaluates the potential geologic hazards that might 
contribute to an oil spill while drilling and developing 
petroleum and natural gas reserves offshore from the New York 
area. 



Foss-Skinner, Jean. 

Norwegian oil: the 'blue-eyed Arabs.' Dun's review, v. 
104, Aug. 1974: 62-64, 66. 

Dun's European Editor interviewed two men who are playing 
kev roles in shaping Norway's oil industry: Minister Ingwald 
Olveseth, the man responsible to Parliament for the oil 
industry; and Arve Jchnsen, who is the chief executive of 
Norway's newly launched state oil company. 



Puckelshaus, William Doyle. 

In an exclusive interview with Offshore, EPA's Puckelshaus 
outlines his environmental goals for the offshore. Offshore, 
v. 32, Hay 1972: 36-38, 40. 



68 



Fudon, Prank H. 

Investment potential of offshore drilling industry. 
Commercial and financial chronicle, v. 212, Oct. 29, 1970: 3, 
14-15. 

"Op-to-date review of offshore oil and natural gas 
developments takes exception to the investment community's 
disenchantment with offshore drilling and related marine 
construction. Hr. Rudon briefly describes many of the smaller 
and larger companies associated in one way or another with 
offshore drilling." 



Sanders, Norman. 

North Sea oil: can the technology cope? New scientist, v. 
56, Nov. 16, 1972: 380-382. 

"So far, there has been relatively little unease about the 
ecoloqical conseguences of North Sea oil exploitation. 
American experience suggests that the oil industry is not yet 
technologically capable of avoiding spills, and undersea 
exploitation has been halted by court action in many parts of 
the United States." 



Schneider, Eric D. 

The deep sea — a habitat for petroleum. Undersea 
technology, v. 10, Oct. 1969: 32-34, 54, 56-57. 

"...examines the potential for oil deposits beneath the 
deep ocean floor." 



Scott, R. W. Snyder, R. E. 

According to Louisiana Gov. Edwin W. Edwards. . .opposition 
to OCS 'leasing is sincere, but misguided. World oil, v. 180, 
Apr. 1975: 67-70. 

Governor Edwin W. Edwards of Louisiana comments on current 
oil and qas energy problems in the O.S. Subjects discussed 
irclude energy legislation, OCS development, and general energy 
related tcpics. 

Shaw, Elmer W. 

A review of the energy resources of the public lands, 
based on studies sponsored by the Public Land Law Review 
Commission. Prepared at the reguest of Henry H. Jackson, 
chairman. Committee on Interior and Insular Affairs, Onited 
States Senate, pursuant to S. Res. 45; a national fuels and 
enerqy policy study. Washington, O.S. Govt. Print. Off., 1971. 
160 p. 

"Serial no. 92-5" 

At head of title: 92d Cong., 1st sess. Committee print. 



69 



Sheets, Kenneth R. 

Is oil off East coast one answer to fuel shortage? O.S. 
news e world report, v. 75, Dec. 24, 1973: 56-58. 

"Many geologists feel certain that vast pools of oil and 
gas are hidden under Atlantic waters. For a survey of the 
potential and the problems... Author talked to the experts, 
visited rigs in the Gulf of Mexico where offshore drilling has 
long been under way." 



Smith, Bobert E., ed. 

Proceedings of marine environmental implications of 
offshore drilling in the eastern Gulf of Hexico; 
conference/workshops. St. Petersburg, State University System, 
Florida Institute cf Oceanography, 1974. 455 p. 



Solanas, Donald W. 

Opdate--outer continental shelf lease management program. 
Journal of petroleum technology, v. 26, Apr. 1974: 388-394. 

The U.S. Geological Survey is the organization that bears 
the responsibility for seeing that offshore petroleum 
exploration and production are conducted properly. Discusses 
two general guestions; how accidents are kept to a minimum and 
how to take care of accidents to save human life and protect 
environment from oil spills. 



Southeast Asia has 26 shows this year. Offshore, v. 34, 
Oct. 1974: 65-70. 

A country-by-country description of oil finds in 1974 in 
Southeast Asia. 



Stone, Oliver. 

Petroleum development under the Outer Continental Shelf 
Lands Act — its future and problems. Natural resources lawyer, 
v. 4, Nov. 1971: 732-736. 

Stone, Oliver L. 

Some aspects of jurisdiction over natural resources under 
the ocean floor. Natural resources lawyer, v. 3, May 1970: 155 
194. 

This paper is concerned with "...the natural resources, 
particularly petroleum, of the continental shelf and the seabed 
and subsoil of the deep oceans beyond national jurisdiction 
under the continental shelf regime." 



70 



Student Council on Pollution and the Environment. Pacific 
Southwest Region. 

Oil drilling in the Santa Barbara Channel. [Santa 
Barbara? Calif. , 1970?! 8, [8] p. 

A review of the Santa Barbara Channel oil spill with 
recommendations on future oil drilling activities. 



Svmposium on Marine Pollution, London, 1973. 

Proceedings. London, Royal Institution of Naval 
Architects, 1973. 106 p. 

Partial contents. — What is marine pollution?, by K. 
Brummage. — The prevention of pollution from chemical tankers, 
by F. Page. --Ship sewage treatment and holding systems, by J. 
Stokes. — Ways and means of dealing with oil pollution, by A. 
Stanford and B. Jarvis. — Pollution risks in offshore oil 
drilling, production and storage, by F. Didier. 



To drill or not to drill. BioScience, v. 24 , June 1974: 
393-395. 

Examines offshore sites in Alaska and the Atlantic Coast, 



U.S. Bureau of Land Management. 

Final environmental statement, FES 73-19, proposed 1973 
outer continental shelf east Texas general oil and gas lease 
sale. r Washington, For sale by the Supt. of Docs., U.S. Govt 
Print. Off., 19733 599 p. 



U.S. Bureau of Land Management. 

Final environmental statement proposed 1974 outer 
continental shelf oil and gas general lease sale, offshore 
Louisiana. [Washington, For sale by the Supt. of Docs., U.S. 
Govt. Print. Off., 19741 3 v. 



U.S. Bureau of Land Manaqement. 

Final environmental statement, proposed 1974 outer 
continental shelf oil and gas general lease sale offshore 
Texas. [Washington, For sale by the Supt. of Docs., U.S. Govt, 
Print. Off., 197^1 2 v. 

Vol. 2--Mitigating measures; unavoidable adverse 
environmental effects. Vol. 3--Ccnsultation and coordination 
with others; attachments. 



U.S. Congress. House. Committee on Appropriations. 
Subcommittee on Dept. of the Interior and Related Agencies. 

Outer continental shelf leasing program. Hearings, 93d 
Cong., 2d sess. Washington, U.S. Govt. Print. Off., 1974. 170 

P. 



71 



O.S. Conqress. House. Committee on Government Operations. 

Our threatened environment: Florida and the Gulf of 
Mexico; nineteenth report together with additional views. 
Washington, O.S. Govt. Print. Off., 1974. 100 p. (93d Cong 
2d sess. House. Report no. 93-1396) 



O.S. Congress. House. Permanent Select Committee on Small 
Business. Subcommittee on Activities of Regulatory Agencies. 

Energy data requirements of the Federal Government: (part 
I — energy crisis and small business) , (part II — oil shale) , 
(part III — Federal offshore oil and gas leasing policies) , 
(part IV— crude oil and propane/conflicts of interest) ; a 
report. Washington, O.S. Govt. Print. Off., 1974. 103 p. 
(93d Cong. , 2d sess. House. Report no. 93-16U8) 

O.S. Congress. Senate. Committee on Commerce. National 
Ocean Policy Study Subcommittee. 

The state role in outer continental shelf development: the 
California experience. Hearings, 93d Cong., 2d sess. Sept. 27 
and 28, 1974. Washington, O.S. Govt. Print. Off., 1974. 192 p, 

"Serial no. 93-124" 



O.S. Congress. Senate. Committee on Interior and Insular 
Affairs. 

Outer Continental Shelf Lands Act amendments and Coastal 
Zone Management let amendments. Joint hearings before the 
Committees on Interior and Insular Affairs and Commerce, Onited 
States Senate, pursuant to S. Res. 45, the national fuels and 
energy policy study and S. Res. 222, the National Ocean Policy 
Study, Ninety-fourth Cong., first sess. Washington, O.S. Govt. 
Print. Off., 1975. 2 v. 

"Serial no. 94-14 (92-104)" 

Hearings held Mar. 14... Apr. 9, 1975. 



O.S. Congress. Senate. Committee on Interior and Insular 
Affairs. Subcommittee on Minerals, Materials, and Fuels. 

Santa Barbara oil pollution. Hearings, 91st Cong., 2d 
sess., on S. 1219, S. 2516, S. 3351, S. 3516, and S. 4017, 
Santa Barbara offshore oil leasing bills and S. 3093, creating 
marine sanctuaries. Part 2. July 21, and 22, 1970. 
Washington, O.S. Govt. Print. Off., 1970. 187-446 p. 

O.S. Congress. Senate. Committee on Interior and Insular 
Affairs. Subcommittee on Minerals, Materials, and Fuels. 

Santa Barbara oil spill. Hearings, 91st Cong., 1st sess. 
on S. 1219. May 19 and 20, 1969. Washington, O.S. Govt. 
Print. Off. , 1969. 186 p. 



72 



D.S. Congress. Senate. Committee on Interior and Insular 
Affairs. Subcommittee on Minerals, Materials and Fuels. 

Santa Barbara Channel. Hearing, 93d Cong., 1st sess., on 
S. 1951 fandl S. 2339. Nov. 13, 1973. Washington, O.S. Govt. 
Print. Off. , 1973. 49 p. 



O.S. Congress. Senate. National Ocean Policy Study. 

Soviet ocean activities: a preliminary survey. Prepared 
at the request of Hon. Warren G. Hagnuson, Chairman Committee 
on Commerce and Hon. Ernest P. Hollings, Chairman National 
Ocear. Policy Study for the use of the Committee on Commerce and 
the National Ocean Study Policy pursuant to S. Res. 222. 
Washington, O.S. Govt. Print. Off., 1975. 81 p. 

At head of title: 94th Cong., 1st sess. Committee print. 

"The report includes most of the important salient aspects 
of Soviet ocean activities such as: fisheries, transportation, 
oceanography, deep-sea mining, underwater activities, oil and 
qas developments on the outer continental shelf and Soviet 
response to marine pollution problems. The report concludes 
with a chapter on the implications of Soviet ocean policy on 
O.S. policy." 



O.S. Council on Environmental Quality. 

OCS oil and gas — an environmental assessment; a report to 
the President. [ Washington, For sale by the Supt. of Docs., 
O.S. Govt. Print. Off.] 1974. 5 v. 



O.S. General Accounting Office. 

Improved inspection and regulation could reduce the 
possibility of oil spills on the outer continental shelf. 
Geological Survey, Deparment of the Interior; report to the 
Conservation and Natural Resources Subcommittee, Committee on 
Government Operations, House of Representatives by the 
Comptroller General of the Onited States. [Washington] 1973. 
44 1. 

"B-146333, June 29, 1973" 



O.S. General Accounting Office. 

Outlook for Federal goals tc accelerate leasing of oil and 
gas resources on the Outer Continental Shelf, Department of the 
Interior, Federal Energy Administration; report to the Congress 
by the Comptroller General of the Onited States. [Washington] 
1975. 40 p. 

"B-118678, Mar. 19, 1975" 

"This report, first of a series on Federal leasing 
policies and practices, focuses on how Interior determined its 
goal for accelerating leasing of oil and gas resources on the 
Shelf, how this goal is related tc Project Independence, and 
constraints which may hinder its accomplishment." 



73 



O.S. Geoloqical Survey. 

Environmental impact statement (draft). [Washington] 
1971, 29 p. 

"Issued by the O.S. Geological Survey in connection with 
exploratory drilling operations on Federal oil and gas leases 
issued under the Outer Continental Shelf Lands Act, Santa 
Barbara Channel area off the Coast of California." 



U.S. Office of Technology Assessment. 

An analysis of the feasibility of separating exploration 
from production of oil and gas on the outer continental shelf. 
Washington, O.S. Govt. Print. Off., 1975. 290 p. 

Prepared for the use of the Senate Committee on Commerce. 



O.S. President, 1969- (Nixon). 

Santa Barbara Channel Oil Leases, etc.; 
message. . .requesting passage of legislation to terminate oil 
exploration leases in the Santa Barbara Channel and to create a 
Marine Sanctuary. [Washington, O.S. Govt. Print. Off., 1970] 
2 p. (91st Cong., 2d sess. House. Document no. 91-349) 



Otton, Albert E. 

A survey of national laws on the control of pollution from 
oil and gas operations on the continental shelf. Columbia 
-journal of transnational law, v. 9, fall 1970: 331-361. 

Examines and points out weaknesses of existing laws and 
regulations affecting pollution from offshore oil operations in 
various coastal states, including the Onited States. Hakes 
recommendations for future action. 



Verschure, P. J. M. 

How long will offshore drilling be American-dominated? 
Oil & gas journal, v. 71, Dec. 31, 1973: 136-138, 140-141. 

Concludes that O.S. domination is likely to continue for 
quite some time. 



Walker (G. H.) 6 Co. 

A comprehensive study of the offshore contract drilling 
industry. New York, 1969. 31 p. 

Weaver, L. K. Jirik, C. J. Pierce, H. F. 

Offshore petroleum studies. [Washington] O.S. Bureau of 
Mines [for sale by the Supt. of Docs., O.S. Govt. Print. Off., 
1973] 30 p. (O.S. Dept. of the Interior. Information 
circular 8575) 

"The objective of this study is to provide an estimate of 
future oil supply from O.S. offshore areas to 1985." 



74 



Weaver, L. K. Pierce, H. F. Jirik, C. J. 

Offshore petroleum studies: composition of the offshore 
D.S. petroleum industry and estimated costs of producing 
petroleum in the Gulf of Hexico. [Washington] U.S. Bureau of 
nines Tfor sale by the Supt. of Docs., U.S. Govt. Print. Off., 
19">3] 168 p. (O.S. Dept. of the Interior. Information 
circular 8557) 



Weaver, Lewis K., and others. 

Offshore petroleum studies: monograph for estimating 
hydrocarbon lease bonus bids in the Gulf of Hexico. 
f Washington 1 O.S. Bureau of Bines ("for sale by the Supt. of 
Docs., O.S. Govt. Print. Off., 1973] 12 p. (O.S. Bureau of 
nines. Information Circular 8609) 

"Supplement to Information circular 8557." 



Whitney, Steve. 

Nixon sells too soon: the undersea chase. Sierra Club 
bulletin, v. 59, Hay 197U: 15-16, 22-23. 

Expresses concern about "the whole complex of 
environmental problem s--both onshore and offshore — that are 
associated with the OCS leasing program." 



Wilson, Howard. 

Federal rules open new era in gulf. Oil S gas journal, v. 
67, Oct. 20, 1969: UU-U6. 

"This is the second in a three-part series... on tLe new 
federal offshore regulations for the Gulf of Hexico. The first 
article last week dealt with confidential data. Next week's 
will cover the pollution aspect." 



Wilson, Howard H. 

Offshore California drilling ban costly. Oil 6 gas 
"journal, v. 69, July 26, 1971: 64-66. 

"California and the nation will suffer an enormous loss of 
oil and revenue if the offshore provinces of that state are not 
reopened to new drilling. This is the conclusion drawn from an 
exhaustive offshore survey made -jointly by several California 
agencies and released in a thick volume entitled •The Offshore 
Petroleum Besource. 1 " 



Wilson, James E. 

Potential reserves of domestic oil and gas. Journal of 
petroleum technology, v. 26, Feb. 197U: 150-156. 



Vo 



World energy and the oceans. [Cambridge] Sea Grant 
Program, Massachusetts Institute of Technology, 1973. [42] p. 
(Massachusetts Institute of Technology. Sea Grant Program. 
Report no. MITSG 74-7) 

Contents. — World energy and the oceans, by Dr. W. E. 
Shoupp. — Key issues in ofshore oil, by Dr. J. W. Devanney III. 
Innovations in heat disposal in the oceans, by D. R. F. 
Harleman. 



The Worldwide search for oil. Business week, no. 2366, 
Feb. 3, 1975: 38-44. 

"High prices of crude have spurred an unprecedented hunt 
by oil producers." 



Young, Warren R. 

Possible solutions to oil spillage, a growing problem. 
Smithsonian, v. 1, Nov. 1970: 19-27. 

The author suggests that the only way to avoid oil spills 
would be to have a non-petroleui economy. 



o 



UNIVERSITY OF FLORIDA 



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